Protected Areas (PAs) provide crucial ecosystem services (ESs) - including provisioning, regulating, and cultural services - to meet human needs at global and local levels, involving multi-stakeholder governance. Developing governance structures to ensure effective and equitable PA management presents challenges. Beyond the dichotomy of command-and-control and market approaches, innovative institutional arrangements are needed to blend different services (e.g., provisioning, regulating, cultural), objectives (e.g., conservation, development, sustainability), and instruments (e.g., command, markets, rewards). However, how to effectively blend these remains poorly understood. Based on ethnographic methods, including interviews, participatory observation, and focus group discussions, this research applied an empirically grounded approach to examine a PA in Southwest China. It illustrates the local process that established a hybrid governance arrangement, combining joint management, market-based payments, and collective action for ESs, to advance livelihood development, cultural preservation, and environmental conservation. Adopting the perspective of "credibility thesis", the paper reveals that institutional credibility has evolved to support this hybrid governance model in meeting diverse needs. It argues that institutional credibility is ensured when stakeholders share notions of justice in the process of institution building. The policy implications highlight the need to invest in institutional capacity building to enhance the credibility of ES governance structures.