Small-scale mariculture has been formally recognised as one of the main strategic economic developments for small-island communities. It serves as a trade-off in the designation of multi-use Marine Protected Areas (MPAs) in developing countries including Indonesia. With the rapid expansion of MPAs in Indonesia’s small islands, more fishermen could turn to mariculture due to its lucrative economic potential. However, mariculture, especially for carnivorous fish species, has sustainability issues that threaten MPAs as a protected ecosystem and mariculture as an important livelihood of marginalised small-island communities. Mariculture also occurs where resources are used for tourism and capture fisheries, which can lead to conflict or competition and complicate decision-making processes for MPA management. Decision-making at all levels is affected by a lack of adequate regulation, unclear or poorly developed site selection criteria and unknown carrying capacity (CC) of MPA mariculture zones. The overarching aims of this study were to assess the sustainability of small-scale mariculture in multi-use MPAs as an economic livelihood from its legal framework and livelihood sustainability and vulnerability, and to develop an integrated site selection and CC framework for sustainable MPA mariculture zones. In order to achieve the aims, this study employed a two-stage research approach. The first stage focussed on describing the legal framework, and investigating the sustainability and vulnerability of mariculture within the context of Indonesian MPAs. Local stakeholders’ perceptions regarding the establishment of an MPA in relation to their livelihood were also studied as part of the vulnerability studies. This part was designed to provide scientific evidence whether mariculture can be legally conducted, support livelihood sustainability and reduce vulnerability risk of local coastal communities in small-island MPAs in Indonesia. A legal framework, using David Gil’s policy analysis, was used to uncover the vague yet redundant and incomplete legal regulatory framework governing mariculture development in Indonesia’s MPAs. The sustainability and vulnerability profiles of the existing mariculture activities were also studied using Livelihood Sustainability Analysis (SLA). The sustainability study developed a set of sustainable livelihood indexes based on five capital assets to compare the sustainability profile of small-scale fish farmers, small-scale fishermen and ecotourism livelihood groups. The vulnerability risks of these local livelihood groups were also compared by developing a specific livelihood vulnerability index. The perception of the livelihood groups regarding the effect of MPA establishment to their livelihoods was determined using descriptive statistics (frequency and thematic analysis). The second stage involved establishing a site selection and carrying capacity framework to ensure that mariculture in Indonesia’s MPAs can be carried out economically and are environmentally sustainable. A GIS and remote sensing site selection framework, based on parameter-specific suitability functions (PSSFs), was employed to design mariculture zones within MPAs. The use of PSSFs within the geometric overlay process was necessary to allow the combination of the hard and soft datasets in the site suitability framework. The carrying capacity of resulting different classes of mariculture zones was then determined using the Modelling–Ongrowing fish farm–Monitoring (MOM) system. This mathematical model of carrying capacity (CC) was modified to suit the tropical condition and mariculture practices (seasonal weather, feed, and net cage specification) where the study was conducted. The results of these CC estimates were then compared to the existing holding density of mariculture activity in the area and the general CC stipulated by the Indonesian MPA regulations. This study uncovered the complex yet imprecise regulations governing the development of mariculture in Indonesia’s MPAs. This created an opportunity for the expansion of medium-scale mariculture in MPAs that outcompetes small-scale mariculture. The designation of mariculture zones for small-scale mariculture, local government and community approval-based permits, and third-party Environmental Impact Assessment (EIA) supervision, could substantially improve the sustainability of small-scale mariculture in MPAs and curb the expansion of medium-scale mariculture. Furthermore, small-scale mariculture as a livelihood has similar sustainability and vulnerability profiles to small-scale and ecotourism households, which tend to be at the intermediate and medium level, respectively. Small-scale fish farmers have a better chance to improve their sustainability profile through capital assets and endowment support from the government as received by other household groups. Such support could directly reduce the vulnerability risk of small-scale fish farmers. The livelihood flexibility developed by small-scale fish farmers also plays an important role in reducing their vulnerability. In addition, small-scale fish farmers also shared similar views with other household groups, for example, that MPA establishment is important to maintain the function of the ecosystem that their livelihood depends upon. Site selection using PSSFs with a geometric mean indicated that only 10% of the total area was suitable for mariculture zones, of which 30% was classified as the best class and 40% as good, for small-scale mariculture. The introduction of a stakeholder preferences sub-model and MPA constraints successfully maintained the integrity of MPA core zones and allowed better location access for small-scale fish farmers to preferred mariculture zones. In addition, the seasonal difference had minimal effect on the site suitability classification of mariculture zones, though the effect of seasonal weather could be different in other MPAs. The use of the Modelling–Ongrowing fish farm–Monitoring (MOM) system revealed that oxygen concentration was the main factor influencing CC, which corresponded positively to site suitability classes. Location 2, classified as the best suitability class, had the best CC of up to 158 kg/m3, while the lowest was location 1 (medium class) of 7.14 kg/m3, depending on seasonality, feed composition and geographic location scenarios. The MOM analysis showed a much greater value of CC for the study sites compared to both the CC limitation set by the MPA regulations and the existing holding density currently practised in the area. This indicated that the general CC limitation of 50% in MPAs has been set too high and needs to be reconsidered for a fair spatial resource use. This study suggests that the CC limit in each MPA should be determined case-by-case and agreed upon by the involved stakeholders. The site selection framework developed in this study and the MOM system could provide an efficient and easy assessment to establish mariculture zones in MPAs and utilise resources fairly and spatially allocate them for small-scale fish farmers. Future work to improve or complement the study could be in the form of comparing the site selection and CC for two or more MPAs that have different seasonal weather characteristics as well as mariculture practices.