© 2019 This paper addresses the formation of social norms of cooperation through interaction in repeated Public Goods Games, using novel multilevel techniques. Cooperation has traditionally been understood as the interplay of static factors such as shared social identity and pre-existing norms. This study investigates the dynamic emergence of cooperative norms in the presence or absence of social categorization. A small effect of categorization was found: Categorization helps initiate and maintain higher levels of cooperation. However, the differences in emergent cooperation between small groups were much stronger than the differences between the Categorization and Non-Categorization conditions. Using explorative analyses, three distinct classes of groups were found. Within groups, group members follow nearly identical rules for their choice of cooperative behavior. We argue that individual behavior converged because of the social interactions within these groups. Overall, the development of cooperation is best predicted by the process of norm formation that occurs when social identities emerge.