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The Tanzanian Community-Based Forest Management policy is based on the assumption that formalized forest tenure by village communities results in increased incentives for sustainable forest management. We compared the policy expectations to village forest management practices in northeastern Tanzania. Findings suggest that the practices follow policy in terms of increased security of rights, but exclusionary management of village forests precludes livelihood benefits while costs are unevenly distributed. Management appears effective at the village scale, but concerted efforts are likely to be needed to increase its long-term and landscape-level sustainability, and to create more significant incentives for the communities involved.