Luxembourg exhibits strong transnational traits within its skills regime, defying any neat fit with existing educational typologies. It is characterised by its high-skill economy, cross-cultural characteristics, and central location within the European Union. As such, Luxembourg has developed a hybrid strategy of responding to labour market challenges, and by that, to skills development. Our institutionalist analysis finds that Luxembourg is involved in transnational skills development in three complementary ways: (a) employers in Luxembourg extensively recruit skilled workers at the European and global levels, but also (b) heavily rely on the distinct skills sets of cross-border commuters from the neighbouring regions of Belgium, France, and Germany (the Greater Region). Furthermore, (c) Luxembourg combines institutional elements of these neighbouring countries – representing distinct models of capitalism and welfare – within its own education system. In combining the specific strengths of different national skills regimes, institutional bricolage represents a core feature of Luxembourg’s highly stratified system of skill formation. Our analytical framework refers to two major comparative political economy perspectives, namely the welfare state and varieties of capitalism approaches, to analyse how Luxembourg has responded to deindustrialisation by creating a domestic transnational labour market.