This paper investigates issues confronting forest management and sustainability, focusing on the governance of the community forest user group (CFUG) initiative in Nepal. The paper begins with a literature review to give a general overview of the historical and current situation of forest governance in Nepal. It explores the historical impacts of unsustainable logging in Nepal and the World Bank Report, which both investigated and explored avenues for improving the forest situation, including community forestry. The paper outlines the development of community forestry, the legislative, regulatory, and governance frameworks underpinning this unique system of community-driven forest management, and its relationship to sustainable forest management (SFM). SFM in turn has engendered a market for sustainably derived timber and labeling systems for ‘good’ wood. The paper continues by providing an analysis of stakeholder attitudes regarding the current forest governance situation in Nepal. Furthermore, it provides another small case study on how such standards might be applied in the local community context of protecting Nepal’s Red Panda while simultaneously delivering sustainable forest management and community development. It concludes with a discussion on the need for governance standards for forest management and community forestry in Nepal.