The interaction between institutions and the economy varies spatially and temporally. At the territorial level, history and differences in resource endowment also shape economic processes. But they do not always explain how an economy or region reacts to exogenous shocking events. Meanwhile, building resilience to exogenous shocking events is critical to peripheral areas. The recent literature suggests that deciphering the nexuses between economies, institutions, and territories can help identify resilience-building strategies and policies. This chapter concerns the US Southwest. In particular, the chapter focuses on the region’s drought resilience in the context of climate change. Climate Change has been projected to affect regions differently around the world. Some of them will see increased precipitation intensity and variability and the associated flooding issues. Others will experience more frequent droughts, for example, the US Southwest. Recent studies have shown that global warming can significantly weaken the North American monsoon and lead to a drier Southwest. Successful adaptation to the change requires building drought resilience at the community level. It is critical for the region’s rural communities (including many Native American reservations), who are more vulnerable to exogenous shocks. This chapter proposes a conceptual model of community resilience and sustainability to explore strategies for building drought-resilient rural communities. Through the model framework, I consider three different pathways of impact and resilience in rural communities: institutional, demographic, and economic. My analysis focuses on the role and formation of community-level (institutional and economic) resilience in the context of the US Southwest. They are necessary conditions for building drought-resilient rural communities in the long run.