The REDD policy proposes to deliver multiple outcomes including emissions reduction, livelihood support and sustainable forest management, and thus appears largely compatible with Community Forestry (CF). However, the addition of a new value (carbon sequestration) to traditional values of CF (local livelihoods and ecological resilience) may have implications for communities and CF management approaches at local level. Based on primary data collected from three Community Forest User Groups (CFUGs) in Nepal, this paper explores local effects of REDD in pilot sites, where the program has been implemented since 2009. Data from in-depth interviews, focus groups and household survey indicates that REDD has generated both positive and negative outcomes. CF condition, CFUGs activities and network, and sources of CFUGs income appeared to be improved, whereas autonomy of CFUGs as independent decision making institutions and customary access rights to forests are both limited, and external political agendas are seen to be replacing the needs and interests of forest users.