There is an increasing consensus that access to forests and forest resources can contribute positively to the reduction of poverty among rural households in developing countries. Furthermore, forests contribute global environmental services such as mitigation of climate change through carbon sequestration. Therefore, sustainable management of forest resources is paramount to ensuring that these resources and services are available for current and future generations of nearby rural populations as well as more distant stakeholders. For most governments and their partners one of the key challenges to achieving sustainable forest resources is identifying a forest management approach that reconciles community interests and forest conservation goals. Currently forest co-management approaches receive support from governments and the donor community because they are hypothesised to have the potential to simultaneously advance community livelihood goals and forest conservation. However, there is limited evidence to support this hypothesis. Therefore this study uses both quantitative and qualitative methods to provide empirical evidence on the extent to which co-management programmes achieve sustainable forest management and reconcile multiple stakeholders’ interest in forests and forest conservation goals. The study uses the case study of the Improved Forest Management for Sustainable Livelihoods Programme (IFMSLP) in Malawi, which is funded by the European Union. The study was conducted in with Zomba district (Zomba-Malosa forest reserve) and Ntchisi district (Ntchisi forest reserve). Household interviews and forest inventory were used to: explore what local actors perceive as criteria for measuring the success of a co-management programme; assess whether co-management can achieved true devolution of powers and responsibilities to local institutions; assess the impact of co-management on forest condition, and; estimate the current livelihood and welfare impacts of the programme. The study shows that, other aspects of co-management and sustainable forest management such as: community participation in decision making; access to and availability of forest resources; and infrastructure development (which are usually not included in forest management impact assessment studies), are also important criteria for assessing a co-management programme from local actor’s perspective. The study also reveals that it is difficult for co-management programmes to realize true devolution because governments retain ownership of the forest and there is limited political will among state authorities to devolve rights and responsibilities to local institutions. The findings of this study suggest that the impact of a co-management programme on forest conditions may vary depending on pre-existing forest conditions as well as on how participating communities understand and interpret the programme. Therefore, due to lack of information on forest condition before the programme, it is difficult to determine the effect of co-management on forest conditions from one-time study data, even with method triangulation. 63% of respondents perceive that co-management has had no impact on their livelihoods. However, 80% are willing to pay) annual membership fees (mean = 812 Malawi kwacha ≈ $2) to participate in the programme, because of perceived possible future benefits. This shows that local people are investing their time and labour in co-management based on optimistic expectations, which puts them at a risk of being taken advantage of by programme initiators as there is no guarantee of a future benefit. Therefore, the opportunity cost of communities’ participation in co-management activities which provide global environmental benefits, is an important reason for governments to consider inclusion of Payment of Ecosystems Services (PES) in the programmes. Finally, the finding of this study suggest that forest co-management has the potential to reconcile community interests and forest conservation, however local actors’ attitudes; unaccountable institutions; tenure systems and; limited knowledge and skill development among local actors may limit its effectiveness.