This study examines the contribution of tourism towards improving the livelihoods of local people in a remote island village of the Indian Sundarbans. The Sundarban Tiger Reserve is a major tourism destination and a small number of local people participate in the tourism sector as vendors, boatmen and guides. No village household subsists entirely on tourism-based income since such jobs are seasonal. A majority of the local service providers operate with very little or no capital investment. Yet households participating in tourism-related activity are better off than those who do not. Tourism participants spend 19% more on food and 38% more on non-food items relative to other villagers. Earnings from tourism appear to at least partially finance year-long consumption. Tourism may also have a conservation effect in that the proportion of forest dependent households is significantly lower among tourism dependent households. There is, however, little evidence of any percolation of tourism-related income to non-participating households through intra-village transactions. The study proposes a carefully crafted policy for promoting nature-based tourism with more room for local participation.