The issue of forest management in Terai has been debated for many years. Being an economically valuable forest, it is always exploited for power and economic benefits. Many forestry programs have been implemented but ultimately failed, due to the lack of consultation and ignoring the role of the local people in forest management. On the other hand, community forestry (CF) program has been implemented since 1978 and has been extremely successful in the mid-hills. Despite the success of CF in the mid-hills, Terai forests were management by government because of the heterogeneous community, large forest blocks and access to the market. Hence, Forest Sector Policy (2000) identified the Collaborative Forest Management (CFM) by involving local and distance users including local and central government. CF activists opposed the CFM model demanding replication of CF in Terai, hence, conflict emerged. Confrontation on policy issue and maximizing profit to local people diverted into CF versus CFM, consequences affect the whole forestry sector. It needs larger consultation process and ethical dialogue with trust, mutual understanding and commitment among the stakeholders for further improvement rather than rivalry.