Current models of magnetars require extremely strong magnetic fields to explain their observed quiescent and bursting emission, implying that the field strength within the star’s outer crust is orders of magnitude larger than the dipole component inferred from spin-down measurements. This presents a serious challenge to theories of magnetic field generation in a proto-neutron star. Here, we present detailed modeling of the evolution of the magnetic field in the crust of a neutron star through 3D simulations. We find that, in the plausible scenario of equipartition of energy between global-scale poloidal and toroidal magnetic components, magnetic instabilities transfer energy to nonaxisymmetric, kilometer-sized magnetic features, in which the local field strength can greatly exceed that of the global-scale field. These intense small-scale magnetic features can induce high-energy bursts through local crust yielding, and the localized enhancement of Ohmic heating can power the star’s persistent emission. Thus, the observed diversity in magnetar behavior can be explained with mixed poloidal–toroidal fields of comparable energies.