Designing appropriate management institutions for the successful integration of conservation and development has proven very difficult. It appears that these activities and interventions often fail to meet either ecological or social objectives. But does this mean that we should abandon our attempts? This paper explores the concept of institutional fit to explain these problems, using an example of a protected area in the Terai region of Nepal. Integration of conservation and development goals is constrained by a lack of fit between the institutions and ecosystems, and between sets of stakeholders. To succeed, we need innovative institutions based on adaptive management, as well as more equitable and inclusionary decision making.