Over the last two decades there have been numerous changes in the organization of the ruling Liberal Democratic Party (LDP) in Japan. The pattern of factionalization has changed significantly in terms of the number of competing major factions, the average size of their membership, and their internal structure. Moreover, a new set of institutionalized norms, such as the seniority and interfactional balancing principles, has emerged to govern organizational processes within the LDP. The conventional approach in the literature on Japanese politics, which focuses on factors unique or distinctive to Japanese history, culture, and social behavior, cannot adequately explain these recent changes in the LDP. This paper proposes an alternative, rational-choice explanation based on the standard microanalytic assumptions. More specifically, it argues that the pattern of the LDP's factionalization is primarily determined by the electoral incentives of two sets of rational actors, LDP politicians and LDP supporters, operating under institutional constraints, such as electoral laws and political funding regulations. It also argues that the organizational norms originate in the promotion incentives of the LDP politicians whose strategies are influenced by the uncertainty in the dynamics of the interfactional political process.