In the buffer zone of the Royal Chitwan National Park (RCNP), community forests represent a key land use to meet the objectives of the buffer zone concept. This article examines three diverse community forests surrounding the national park and explores how national policy has been mediated by emerging community forestry institutions to create different levels of resource access and benefit distribution both within and between local user groups. Mindful of recent critiques of community-based conservation, the analysis gives considerable attention to the dynamics of power relations and inequality. The extent to which property rights have been transferred to the local level is evaluated and to whom power has been devolved in the process is assessed. The distribution of benefits arising from community forestry is critically examined. It seems that the current system for community forestry creates sufficient incentives for local cooperation due to the potential for increased access to important resources and a high perception of ownership of community forests among the communities. However, emerging institutions vary in the extent to which they reproduce favourable resource access conditions for elites and benefit distribution does seem to be skewed in favour of the wealthy and higher castes, even where management practices on the surface appear fair. National policy creates sufficient but not necessary conditions for achieving downward accountability, transparency and fairness. Greater attention to these issues is needed for buffer zone community forestry to better serve the poor and marginalised populations within user groups.