Studies of cultural differentiation have shown that social mechanisms that normally lead to cultural convergence--homophily and influence--can also explain how distinct cultural groups can form. However, this emergent cultural diversity has proven to be unstable in the face of cultural drift--small errors or innovations that allow cultures to change from within. The authors develop a model of cultural differentiation that combines the traditional mechanisms of homophily and influence with a third mechanism of network homophily, in which network structure co-evolves with cultural interaction. Results show that in certain regions of the parameter space, these co-evolutionary dynamics can lead to patterns of cultural diversity that are stable in the presence of cultural drift. The authors address the implications of these findings for understanding the stability of cultural diversity in the face of increasing technological trends toward globalization. (Contains 6 notes and 10 figures.)