Forest management by small farmers in the Amazon has been facing various institutional changes as a result of a shift from government to forest governance. Although new legislation has been designed to create opportunities for local communities and for forest preservation, the outcome of environmental governance at the local level remains arbitrary or lacking in effectiveness. By means of case studies in communities in the Amazon region of both Bolivia and Ecuador, this study reveals the dynamics of policy implementation at the local level as a result of forest governance. These dynamics illustrate that forest policy, as only one of the many institutional influences on forest management in local communities, often being in conflict with local needs, norms and traditions.