This research was carried out in Lundi Khola sub-watershed of Gorkha District which represents the Mid-hill geographic region of Nepal. Landsat satellite images of the year 1989 and 2001 were used. Questionnaire survey, key informant interview, GPS points and direct field observations were carried out to gather socio-economic and bio-physical data. Supervised classification was used to prepare land cover maps. Change in land use and forest cover was calculated. Descriptive statistical tools were used to analyze the social data with the help of SPSS and excel programmes. Results showed increase in forest cover, Khet (irrigated paddy land) and barren land whereas decrease in shrub land and Bari (rain fed upland). Forest cover of 1326.16 ha (37.68%) in 1989 increased at the rate of 0.94 percent per year to 1513.14 ha (43.01%) in 2002 mostly at the expense of shrub land and Bari. Different socio-economic factors associated with forest cover increase were assessed. Rapid changes in livelihood such as decreased dependency on agriculture, decrease in number of livestock, increase in off-farm income, and increase in out-migration, which directly or indirectly reduced the pressure on forests were observed.