The community forestry programme in Nepal has been a major thrust area of forest management over the last two decades. Community forestry programme is operating with twin objectives of forest management and human resource development at grassroots levels by establishing community forestry users groups. The present study was carried out in three community forestry users groups of Nawalparasi district,Nepal.The study examined the functioning and governance of community forestry users groups, share of income derived from community forestry among different income groups of users, determinants of forest income, impact of community forestry on income distribution among different user groups, impact of community forestry on employment and wage rates in the labour market.Different descriptive analysis and statistical test suggests there is need to establish agroforestry system, provide more trainings, run different programmes for income generating activities, provide more employment by involving forest dependent people in different forest activities and establishing forest based industries by users group to uplift the socio-economic condition of forest dependent low income population.