The forests of Nepal, which in the past were at least nominally under the direct control of the state, are today increasingly entrusted to local people in the name of community forestry (CF). CF is considered a successful endeavour in managing forest resources, conserving biodiversity and supplying people with basic economic needs. In order to assess to what extent the two goals of biodiversity conservation and meeting economic needs of people have been integrated through CF, four community forestry user groups (CFUGs) were studied in the Mid-hills ecological zone. Based on a participatory survey and a critical review of the statutes and operational plans of these CFUGs, it was found that integration of biodiversity conservation was still insufficient, and that improvements in the policy and management regimes of CF are necessary to achieve a balance between biodiversity conservation and economic use of the forest resources.