The relationship between diversification and labor productivity is a pressing issue for diversified farming systems (DFS), which must compete with the high labor productivity of specialized and mechanized industrial farming systems. Synergies between multiple production systems represent an alternative pathway for enhancing labor productivity, contrasting with the economies of scale achieved by industrial farming. Facing a lack of technical and institutional support for managing diversified systems, DFS turn to grassroots agroecological networks for support. Permaculture is a grassroots network with an emphasis on diversified production that—despite its international scope and high public profile—has received little scholarly attention. In this exploratory study we assessed the relationship between diversification, labor productivity and involvement with permaculture, using data from 196 enterprises (i.e., distinct sources of income or aspects of a farm business) on 36 permaculture farms in the USA. We characterized diversification in two ways: by income at the level of the whole farm, and by labor for production enterprises only. By fitting a multilevel model of labor productivity (enterprises nested within farms) we assessed the evidence for synergies in production, i.e., positive relationships between diversification and returns to labor. Results indicated that both production diversity and level of involvement in the permaculture network had significant positive effects on labor productivity. This effect disappeared, however, when both diversity and participation were at their highest levels. Results also indicate that high levels of diversification shift tree crops from the lowest labor productivity of any type of production enterprise to the highest. Through this first ever (to our knowledge) systematic investigation of permaculture farms, our results provide support for the presence of production synergies in DFS, and for the role of permaculture in helping farmers achieve these synergies.