In the last decades, rapid agricultural commercialization has led to landscape simplification, posing threats to the social and ecological values of agroecosystems worldwide. This paper draws upon the landscape commons concept, advocating for an institutional perspective to comprehensively understand the local governance concerning landscape simplification. We contributed to commons research by expanding the scope into holistic and multifunctional landscape systems, and particularly concentrate on pond landscapes. We select the case of a dike-pond system in the Pearl River Delta, China, to scrutinize the local institutional arrangements and their interplay with landscape simplification. This study utilizes the Institutional Analysis and Development (IAD) framework in conjunction with Ostrom’s Design Principles (DPs). Findings from the study reveal that an emphasis on ponds exhibiting comparative profit advantages over dikes and rivers, coupled with a preference for intensive fish production in collective decision-making, has resulted in land cover simplification and erosion of the system’s multifunctionality. To address this issue, we recommend considering multiple biophysical elements and functions in the governance of landscape commons while identifying avenues to reinforce local institutions, in alignment with Ostrom’s DPs.