This paper reflects the current progress made within Community Forest Users Groups (CFUGs) towards institutionalizing the issue of social inclusion at local level. In the three districts: Baglung, Myagdi and Parbat, the total of 1012 CFUGs manage about 51231 ha of community forests which involves more than 90 thousands household users. The analysis has shown that the holding of decision making positions by poor, dalits, disadvantaged janajatis and women has increased significantly in last 7 years i.e. during 2002 to 2009. The results compare the status of women, dalits, disadvantaged janajatis and poor in committees and committees' key positions (Chairperson, Treasurer and Secretary). For example, % of Dalits in CFUGs committees has increased to 21% in 2009 from only 11% in 2002 and that in CFUGC key positions has increased to 8% from 1%. Well being assessment has been mandatory for all CFUGs for ensuring the identification of poor and excluded (P&Es) households for justified flow of programme inputs into target groups. The paper also reflects other aspects like participation of P&Es in meetings, access of P&Es over resources and services including IGAs, capacity growth of forest users and roles of the concerned stakeholders. Livelihoods & Forestry Programme (LFP) has been supporting the process of CFUGs in the study area since 2001. However, the process is being facilitated jointly by District Forest Office, LFP, partner NGOs and other SHs. CFUG annual monitoring data, reports and records at DFOs and LFP and the author's own field experiences in forestry sector have been the main base for the paper.