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With the cases from 10 community forests of western Nepal, the study observed that, after decentralization, all forests were actively as well as sustainably harvested by local communities, supporting the general ‘conservation through economically rational utilization’ predictions of common pool resource management theory. The study further revealed that total forest income contributed about 5.8% to total household income, ranging from 3.8 to 17.4% for the richest and poorest, respectively. Analyses on poverty indices and Gini coefficients showed that incorporating forest incomes in total household income reduced measured rural poverty and income inequality to some extent. On-farm trees were found to be very important in terms of supplying firewood and especially fodder for the rural households. Furthermore, the results suggest that, overall moderate participation in community forestry activities is by far most common for rural households. Yet, there are several determinant factors which influence the level of participation. The study showed that community defined and enforced access rules do not necessarily maintain species diversity or regulate the forest stand structure.