Community forestry in Nepal has a well-documented history of over 25 years. It is now widely perceived as having real capacity for making an effective contribution towards addressing the environmental, socioeconomic and political problems raised by Nepal’s rapid progression from a feudal and isolated state into the modern, globalised world. This paper analyses the evolution of community forestry in Nepal, focusing on how policy, institutions and practical innovations evolved together to create a robust system of community forestry. It highlights the key outcomes of community forestry in the aspects of livelihoods and democracy and identifies two key lessons in relation to forest resource management, social inclusion and contribution to democratization in Nepal. First, mechanisms for policy amendment and revision for community-based forest management need to be based on real-life experiences rather than ad hoc and top-down decisionmaking. Second, if given complete autonomy and devolution of power, community forest user groups can become viable local institutions for sustaining forests and local democracy, and delivering rural development servic