Discrete latent constructs are useful and versatile tools when applied to theories or hypotheses typically made in cultural psychology. The two-level latent class model (TL-LCM) is proposed as an analytical framework using discrete latent variables for underlying typological structure. The typological and probabilistic characteristics of the TL-LCM offer several advantages over the traditional dimensional and deterministic models commonly used in cross-cultural research. Specifically, the TL-LCM allows researchers to form alternative typological hypotheses about the latent constructs instead of being bound with dimensional assumptions of latent constructs. In addition, the TL-LCM provides a probabilistic approach to studying the latent structures simultaneously at two nested levels. The probabilistic characteristic of the TL-LCM also relaxes the strong and often unrealistic assumption that individuals within the same higher unit are homogeneous. Therefore, the TL-LCM not only offers researchers new potential perspectives in exploring differences between cultures, but it also facilitates the process of forming theories and hypotheses so that knowledge and understanding of cultural differences and similarities can be further advanced. Two examples demonstrated the usefulness and flexibility of applying the TL-LCM to analyze nested cross-cultural data. The examples showed that differences between countries can be thought of as arising from the fact that individuals within different countries have different probabilities of falling into one of multiple classes, rather than assuming that the individuals within each country are homogeneous.