A climate policy initiative called ‘Reduced Emission from Deforestation and Forest Degradation and enhancement of forest carbon stock in developing countries (REDD+) is under consideration by the United Nations Framework Convention on Climate Change (UNFCCC). This policy is aimed at national level reduction of forest emissions in developing countries, as measured against an agreed upon national reference emission level. Net emission reductions would be credited and sold to an international fund or carbon market. It was conceived originally as a mechanism to encourage countries with high rates of deforestation, such as Brazil and Indonesia, to curb large scale deforestation due to agricultural expansion and timber extraction. But its potential has also been seen in terms of rewarding indigenous people and local communities for improved management of their forests such that biomass levels remain stable or increase. Since REDD+ is performance-based, the incentive for carbon services provided by such communities will be directly dependent on the annual carbon increment. This paper examines the carbon sequestration potential of community-based forest management in four community forests in Nepal. The four community forests (CFs) selected are from different watersheds in three physiographic regions. Forest carbon pools were measured in two successive years using the standard ground based inventory techniques. The measurements indicate that these CFs (with a total area of 630 ha) had a stock of approximately 478,000 tonnes CO₂e at the end of 2009, and through the CF practices, are able to sequester an additional 4700 tCO₂e every year. Furthermore, it assesses different management practices that could affect the carbon sequestration.