Two leasehold forestry case studies reveal potential limitations in the poverty alleviation potential of Nepal's leasehold forestry program. First, even though the program is targeted toward the poorest, nonpoor households can find opportunities to enter leasehold forest user groups. Second, by not raising the incomes and living standards of all households in a group simultaneously, it is possible for leasehold forestry to simply redistribute poverty. These limitations may be problems of implementation, rather than design. If so, it is important for implementing officials to be cautious when forming leasehold forests.