This paper examines the importance of income generated from community forest to the rural poor in Kaski District, Nepal. The results of the study show that on average, households earn 7.4% of their cash income from community forests. Poor households are more reliant on forest activities compared with the better off. They earn 13.6% of their total household income from community forest compared to the rich households who earn only 2.1%. The results of the study also reveal that income from community forest have a stronger equalizing effect on local income distribution. The Gini coefficient was computed as 0.37 when income from community forest was considered and 0.53 when it was ignored. These findings show the importance of community forests to the rural poor and underprivileged households. The findings also suggest that in designing community forestry programs, policy makers should not ignore socio-economic disparity among the forest user households.