Researchers argue that third-party involvement is critical for sustaining human cooperation, yet how third parties contribute remains unclear, especially in small-scale, politically decentralized societies. In a study of wrongdoing and punishment among the Mentawai horticulturalists of Indonesia, we test two hypotheses of third-party involvement: punishment and mediation. From a sample of 444 transgressions, most of which were followed by the payment of a fine (usually in pigs, durian trees, etc.), we find no evidence of third-party punishment. Victims or aggrieved family members demanded fines, and if an aggressor was punished for failing to pay, punishment was always imposed by the victim or an aggrieved party and never by third parties. We also find little evidence of indirect sanctions by third parties. Nearly 20% of transgressions were followed by no punishment, and as predicted by dyadic models of punishment, punishment was less likely when transgressions were among related individuals. At the same time, third parties—especially shamans and elders—were often called as mediators, and mediators were called more as cooperation was threatened. Moreover, government officials appear to fill similar roles as community mediators, demonstrating how governmental intervention might contribute to the decline of local leadership institutions. These findings suggest that, among the Mentawai, institutionalized punishment functions more to restore dyadic cooperation than to enforce norms.