Extensive rural regions are facing major socio-economic, political and environmental change from the dual effects of agricultural restructuring and environmental degradation. While central governments often rely on regional level policy responses, local actors, such as rural local governments may resist these ‘top-down’ initiatives. This paper examines the oppositional response of 34 rural local governments to state-led regionalisation for economic development and natural resource management in the extensive and sparely populated Wheatbelt region of Western Australia. The analysis explores how state threats of amalgamation; shifting national policy empathies in rural development; and, local preferences for horizontal rather than vertical forms of cooperation are influential in catalysing a brand of defensive regionalism amongst local government actors. Adopting this defensive posture allowed local actors to both buffer state intervention and improve the effectiveness of their own cooperative planning and management activities for sustainable development. These observations are interpreted through concepts of collective identity formation, providing an analytical perspective that is sensitive to the inter-scalar politics in rural governance.