This study examines the contribution of forest products from community forests to household income, with particular emphasis on institutional differences in management and benefit distribution. Two community-managed forests (with formal and informal institutions) were studied in the Pyuthan district of Nepal. Findings show that the contribution of forest products to household income is higher in the case of forest management without a formal institution than in the case of management under a formal institution. The analysis of household level benefits indicates that poorer households, who are more dependent on forest products, bear the burden of conservation. This is mainly a result of the access and conservation rules imposed by formal forest user groups.