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Forest degradation is broadly defined as a reduction in the capacity of a forest to produce ecosystem services such as carbon storage and wood products as a result of anthropogenic and environmental changes. The main causes of degradation include unsustainable logging, agriculture, invasive species, fire, fuelwood gathering, and livestock grazing. Forest degradation is widespread and has become an important consideration in global policy processes that deal with biodiversity, climate change, and forest management. There is, however, no generally recognized way to identify a degraded forest because perceptions of forest degradation vary depending on the cause, the particular goods or services of interest, and the temporal and spatial scales considered. Here, we suggest that there are types of forest degradation that produce a continuum of decline in provision of ecosystem services, from those in primary forests through various forms of managed forests to deforestation. Forest degradation must be measured against a desired baseline condition, and the types of degradation can be represented using five criteria that relate to the drivers of degradation, loss of ecosystem services and sustainable management, including: productivity, biodiversity, unusual disturbances, protective functions, and carbon storage. These criteria are not meant to be equivalent and some might be considered more important than others, depending on the local forest management objectives. We propose a minimum subset of seven indicators for the five criteria that should be assessed to determine forest degradation under a sustainable ecosystem management regime. The indicators can be remotely sensed (although improving calibration requires ground work) and aggregated from stand to management unit or landscape levels and ultimately to sub-national and national scales.