This article uses a two-level framework to explain variation in Latin American populist parties' responses to the neoliberal challenge of the 1980s and 1990s. First, it examines the incentives for adaptation, focusing on the electoral and economic environments in which parties operated. Second, it examines parties' organizational capacity to adapt, focusing on leadership renovation and the accountability of office-holding leaders to unions and party authorities. This framework is applied to four cases: the Argentine Justicialista Party (PJ), the Mexican Institutional Revolutionary Party (PRI), the Peruvian APRA party, and Venezuelan Democratic Action (AD). In Argentina, the combination of strong incentives and substantial adaptive capacity resulted in radical programmatic change and electoral success. In Mexico, where the PRI had high adaptive capacity but faced somewhat weaker external incentives, programmatic change was slower but nevertheless substantial, and the party survived as a major political force. In Peru, where APRA had some capacity but little incentive to adapt, and in Venezuela, where AD had neither a strong incentive nor the capacity to adapt, populist parties achieved little programmatic change and suffered steep electoral decline.