Abstract: Against the backdrop of environmental decentralization with Chinese characteristics, this paper posited fundamental assumptions concerning pollution management decision-making in livestock and poultry farming within the principal-agent framework of the central and local governments. A dynamic game model encompassing the “central government, local governments, and livestock enterprises” was developed to investigate the evolutionary processes and mechanisms underlying the strategic choices of these entities. Utilizing a simulation model, the paper dynamically analyzed policy instruments aiming at facilitating an idealized game equilibrium among the stakeholders. The findings revealed significant interconnections and multiple evolutionarily stable strategies among the decision-making behaviors of the central government, local governments, and livestock enterprises. Specifically, the most rapid attainment of an effective stable equilibrium occurred when the central government opted for a high degree of environmental decentralization, local governments intensified environmental regulation, and livestock enterprises committed to pollution reduction. Sensitivity analysis of mixed equilibrium strategies indicated that measures such as increasing special subsidies for pollution control and enhancing the assessment of green development performance could incentivize local governments to actively engage in environmental regulation and pollution management. Furthermore, raising environmental protection taxes, strengthening penalties for pollution violations, and increasing the proportion of subsidies allocated by local governments could make pollution reduction an evolutionarily stable strategy for livestock enterprises. Consequently, the paper proposed corresponding solutions from the perspectives of profit distribution mechanisms and endogenous institutional design to promote incentive compatibility among the three parties and to achieve an optimal equilibrium.