In Bhutan, a management plan is a prerequisite for commercial harvesting of NWFPs. Sofar, 36 Community Forest (CF) Management Plans are in place focused on the management of NWFP species. The formation of a CF management group is a first step in value chain development as it provides for legal access to NWFPs for commercial purposes.  However, a range of challenges exist to realize the full economic potential from NWFPs, including strict and cumbersome regulations and procedures, lack of effective cooperation and coordination among different stakeholders in NWFP value chains, ensuring sustainable management practices, low and dispersed volumes of NWFPs, irregular supply and demand, inadequate market information services, lack of information on quantity and quality requirements (including grading, (pre- )processing, and product design), low and fluctuating prices,  poor infrastructure and high transportation costs, intellectual property rights, lack of entrepreneurial skills, lack of knowledge about the ecology of species, inadequate technology, proper functioning of CF groups, etc. In order to tackle the challenges above, the Department of Forests recently launched the “National Strategy for the development of NWFPs in Bhutan 2008-2018” and the “Interim framework for collection and management of NWFPs” with the aim to strengthen the sustainable harvesting, management, marketing and trade of NWFPs. The interim framework includes a template for a simplified management plan for NWFPs, and outlines the roles and responsibilities of the different actors, including forest officers, market service, researchers, NWFP collection groups, and traders & buyers. This framework was put in place as it was felt that the strict conservation oriented national policy environment and the lack of collaboration and coordination were the most limiting factors for further NWFP development. This paper describes the opportunities and challenges for economic development from NWFPs in more detail, linked to practical experiences from CF sites in Bhutan. The paper argues that the realization of the economic potential depends on a number of factors and most importantly on: the enabling national policy environment, legal access to and sustainable management of NWFP resources, a good functioning CF group with the institutional arrangements formalized in by-laws, secured marketing linkages including inclusive business arrangements and proper collaboration among the different actors in the value chain. However, there will always be some external factors such as changes in demand and prices that can make or break the opportunities for economic development and poverty reduction.