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Reducing emissions from deforestation and forest degradation (REDD) in the tropics could slow climate change while contributing to biodiversity conservation and to improvement of people’s livelihoods. In this study, we assessed the opportunities and challenges of implementing REDD in South West (SW) Uganda. We consulted key stakeholders and reviewed regional literature particularly focusing on the opportunities for conservation and human welfare benefits. We structured our study using the Simpson and Vira’s (2010) framework for assessing policy interventions. The leading drivers of forest loss and degradation include escalating timber trade, fuel-wood extraction and agricultural expansion. Forestry authorities were poorly funded, largely uncoordinated and widely accused of corruption. Land tenure was a concern with many de-facto owners lacking legal titles. Generally, local stakeholders had limited awareness of REDD, and local expectations appeared un-realistically high. Mechanisms for allocating and administering REDD payments remained unknown. However, civil society organisations appeared the most popular option to manage REDD funding as government agencies had limited credibility. For REDD to succeed, the challenges we have highlighted will need to be addressed: key to success will be improvements in foundational knowledge, enabling institutions and social conditions. Our results have implications for potential REDD activities around the world which face similar challenges.