Indonesia has formally adopted restorative justice for children in conflict with the law, yet diversion continues to operate largely as a procedural device for terminating proceedings rather than as a mechanism of substantive restoration. Existing scholarship has examined diversion and customary dispute settlement as two separate fields, leaving unresolved the prior conceptual question of what may legitimately be transferred from customary criminal law into the state system. This study addresses that gap by arguing that integration should concern restorative values and deliberative mechanisms, not customary sanctions or the wholesale transplantation of customary norms. Employing normative legal research that combines statutory, conceptual, legal-anthropological and comparative approaches, the study analyses the philosophical, constitutional and sociological foundations of restorative justice for children, evaluates customary criminal law as a manifestation of living law, and compares Indonesian practice with indigenous-informed juvenile justice in New Zealand, Canada, Australia and South Africa. The study finds substantive convergence between customary settlement and restorative justice, but also identifies three risks that the literature has under-examined: the ceremonial capture of customary forums, asymmetries of bargaining power affecting victims and children, and the absence of enforceable procedural minima. Its principal contribution is the Integrated Customary Restorative Justice Model (ICRJM), a three-pillar and five-stage framework that subjects customary participation to normative verification, ratification and post-agreement monitoring. Theoretically, the model advances a living law-based account of restorative justice in which social legitimacy is treated as a condition, and not merely a correlate, of restorative effectiveness.