Community forestry (CF) is a government-adopted forest management practice introduced in Nepal in the late 1970s, in which the local community controls a legally defined area of forest in terms of its management and the conservation and utilization of forest products. In Nepal, CF is one of the most successful strategies for managing natural resources with the active participation of rural communities. The overall objective of this study was to determine how to improve the utilization of forest products and rural livelihoods through CF. The analysis was carried out through a household survey, using a random sampling, along with formal and informal discussions with concerned parties. The results showed that CF was effective in improving sustainable forest resources for rural livelihoods. CF income comes from forestry and non-forestry sources, and it is invested in various activities such as community development and forest management. These activities also improve rural people's livelihood and foster social development.