The degradation of the mountain ecosystems in southwestern China has been unprecedented in speed and scale over the past decades. Deforestation, overgrazing, water and soil erosion, loss of soil fertility and declining or poor crop yields are alarming indicators of unsustainability due to rapid population pressure. Under the conditions of shortage of arable land, more marginal and forest lands are being reclaimed for agricultural use, and this accelerates the degradation of the fragile mountain ecosystems. Moreover, inaccessibility and a low level of education are preventing development in mountain communities. Agroforestry provides a promising resource-centered technology to meet the twin goals of productivity and conservation. This paper discusses the indigenous agroforestry system practiced in southwestern China, and the promising economic and ecological benefits. People in southwestern China have accumulated abundant knowledge on the utilization of agroforestry technologies to rehabilitate degraded land and the multiple benefits that follow some indigenous practices. Integrating the agroforestry system and modern agricultural technologies can be an effective approach for the sustainable development of mountain ecosystems.