The ecological problems, including degradation of fragile ecosystems, of the Himalaya are quite conspicuous. A rapid depletion of forest resources is the main cause of environmental degradation and economic deterioration. Watersheds are considered as a unit for natural resource management and development in hilly areas; therefore a case-study of Mamlay watershed of Sikkim is presented in this paper. The Mamley watershed presents a viable system having a gradient of altitude where almost all types of land-uses that are common in the eastern Himalaya are found. All the ethno-cultural groups of Sikkim are present in this watershed, although the agricultural sector provides the main land-use, followed by forestry. Most of the forested areas in the Himalaya have been purportedly destroyed for the expansion of agricultural land. A similar situation was experienced in the Mamlay watershed, where an increase of 12.79% of the land-area used for agriculture has been recorded in the past 40 years. The watershed being fragile, 62% of the area is under intensive agricultural practice. Land-use and spatial relationships in the perspective of conservation are presented in this paper. Great genetic diversity of agricultural crops and trees has been recorded in this small watershed. Conservation ethics of optimum utilization/production of the resources, following traditional practices without much degrading of the system which is believed to be sustainable, was practised earlier in the watershed. But recently, due to population pressure and fragmentation of farm-owning families, the balance of land-use, natural resource utilization, and conservation, has become perturbed. Examples of traditional adaptation, indigenous knowledge, and perception of conservation amongst farm-owning families, are also presented in the paper.