Despite large scale expansion of community forestry (CF) in Nepal, there is no clear and consistent contributions to livelihood, especially of the poor. While there are some studies presenting evidences to show this limited positive impact of community forestry, there is still limited understanding as regards why the poor have not been able to reap the benefits as expected. This paper discusses six key factors affecting the ways by which benefits from CF are generated and distributed, based on the findings of a recently conducted participatory action research with four forest user groups in the western hills of Nepal. The key factors include: (1) limited support from the District Forest Office; (2) limited access of committee members to new information and knowledge; (3) limited knowledge and techniques for CF management; (4) limited access of the poor in forest user group decision making; (5) inappropriate arrangements for forest products distribution; and (6) emphasis on forest protection, rather than management.