Social media has become a major platform for information-exchange, discourse, and protest and has been linked to a wide range of pressing macro developments. Consequenlty, there is significant interest from scholars as well as from the wider publuc to understand how social media affordances interact with human behavior. In attempts to address these demands, the present article borrows from the social identity tradition to explain group formation processes in Web 2.0 and other online ecosystems. We propose that online users creatively and strategically exploit the affordances provided by platforms and technologies to construct and perform collective selfhood. We emphasize the relevance of community development, norm consensualization, and emotional alignment as recursive dynamic processes that ¿ in symbiosis ¿ provide a functional basis for social identities. We outline these proposed mechanisms based on a corpus of interdisciplinary literature and suggest avenues for future research.