Miller's Living Systems Theory (LST) is known to be very comprehensive. It comprises eight nested hierarchical levels. It also includes twenty critical subsystems. While Miller's approach has been analyzed and applied in great detail, some problematic features remain, requiring further explication. One of these is the relationship between reduction and emergence in LST. There are at least four relevant possibilities. One is that LST exhibits neither clear reductionism nor emergence, but is essentially "neutral" in this regard. Another is that the apparent comprehensiveness of LST is illusory, as the approach remains vulnerable to reduction that could ultimately reduce it to a shadow of its present self. The charge of reductionism has been made by critics leading Miller to defend this theory vehemently as nonreductionist in nature. A third possibility is that LST is not reductionist, but is in fact an emergent theory. Miller makes this claim quite strongly. A fourth possibility, and in some ways the most analytically problematic, is that LST exhibits evidence of both reductionism and emergence simultaneously. Some critics might see this fourth situation as evidence of a troubling paradox or anomaly that must be resolved before further progress can be made in the explication and application of LST. The purpose of the paper is to remove this apparent anomaly. The paper removes this anomaly by differentiating between new-variable emergence and transformational emergence. No concrete evidence is found to contradict Miler's claim of emergence in LST, and thus no true anomaly exists.