<p>It is a widely held view that Nepal has undergone widespread deforestation. The reality is that although some parts of the hill regions have lost a great deal of their forest cover, many others are still well covered. It is postulated that villagers respond to shortages of forest products by developing indigenous systems for managing the forests under their control. This is in spite of the fact that the legal ownership of most of the forests rests with the government. The type of system that arises and the way it develops depend on the “perceived need”; of the villagers for particular forest products. A model is described that explains the various reactions of individuals and community groups in terms of resource availability. This also allows insights into why externally sponsored community forestry programs may succeed or fail.</p>