Despite continued emphasis on devolving forest management authorities and responsibilities to local communities in many countries, in practice genuine devolution of authority and power over the forest has occurred only to a limited extent. Taking evidences from Nepal's community forestry, this paper argues that the limited implementation of devolution policy is primarily because of the poor governance and weak institutions. Building on this conclusion, it draws some strategies to enhance effectiveness of the system of forest governance and institutional structure to facilitate better implementation of policy in the forestry sector.