This paper presents the results of a three-year action research project, which investigated the impacts of participatory forest management (PFM) on poverty. Beginning with an analysis of over 30 cases reported in the literature, the project went on to undertake field research in Kenya, Tanzania and Nepal, three countries representing very different stages in and approaches to the implementation of PFM. PFM typically provides a new decision-making forum and may reroute previously direct household benefits to the user group or community level. Regardless of PFM model, the research shows that the key to providing rural people with a sustainable and equitably distributed stream of net benefits is to adopt poverty reduction as a stated objective, allow for both subsistence and commercial use of forest products, design appropriate PFM institutions, introduce transparent and equitable means of benefit-sharing, and provide sufficient support during establishment of PFM initiatives.