In developing countries, such as Ethiopia, forest conservation by restriction of human activities, causes conflicts between local communities and the state, and in turn, leads to further deforestation / degradation. Natural resources, such as water and forests, are not only the socio-economic buffer of the poor people, but they are also important basics for the livelihood development of rural communities. The change in forest management from fully centralized control of the resource towards more participatory approach had many positive impacts on the forest and local people as evidenced by the findings of the case study. Community based forestry is not only implemented for the benefits of the communities themselves, but it is also used to complement state and public purposes of conservation. The positive changes in forest status provide evidences of ecological sustainability of the resource, and the findings also signify to some extent the success of forest conservation efforts by local communities.