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In recognition of growing United States interest in environmental diplomacy and security as a part of U.S. foreign policy and the fact that Indonesia holds much of the world's natural resources, the purpose of this paper is to show how Indonesia's environmental problems are causing instability in the region and could lead to increased U.S. involvement in the region. The paper assesses Indonesia's environmental situation, its capabilities to handle environmental issues, and then explores environmental security issues that could cause internal and international conflict. The methodology used in researching this paper was limited to a literature review of material published primarily since 1994, on-line Internet resources, current newspapers, and radio and television news reports. The research found that the major environmental problems center on the effects of rapid urbanization, deforestation, and both marine and land pollution. While there is a well-established environmental infrastructure in place, there are still examples of both internal and international conflicts due to Indonesia's environmental problems. A 1997 forest fire in Indonesia was considered a planetary disaster and caused smoke and haze that lasted for months across Southeast Asia. The long-term implications include health problems for more than 20 million people and that threat of future legal action by neighboring countries. This environmentally-induced instability could lead to increased U.S. involvement in the region to protect U.S. national security interests.