We introduce a projection-based model reduction method that systematically accounts for nonlinear interactions between the resolved and unresolved scales of the flow in a low-dimensional dynamical systems model. The proposed method uses a separation of time scales between the resolved and subscale variables to derive a reduced-order model with cubic closure terms for the truncated modes, generalizing the classic Stuart–Landau equation. The leading-order cubic terms are determined by averaging out fast variables through a perturbation series approximation of the action of a stochastic Koopman operator. We show analytically that this multiscale closure model can capture both the effects of mean-flow deformation and the energy cascade before demonstrating improved stability and accuracy in models of chaotic lid-driven cavity flow and vortex pairing in a mixing layer. This approach to closure modelling establishes a general theory for the origin and role of cubic nonlinearities in low-dimensional models of incompressible flows.