This study used two contrasting sample villages (one relatively successful and the other relatively unsuccessful) as case study sites to investigate the impacts of a forest-based settlement project on community livelihood. It was found that although since customary forestry practices (shifting cultivation) could not support participants' livelihoods all year, joining the settlement project had improved their livelihoods. Many project participants have given up customary forestry practices completely and diversified their livelihood strategies. Due to budget allocation disparities, differences in raising awareness about project benefits, and inconsistencies in monitoring and motivation, project outcomes varied between the villages. Several factors were identified that underlay success or failure of the settlement project in achieving targeted project's objectives. A recommendation is made for effective participation by participants that would heighten the sense of ownership, enhance collective management, and ensure long-term project sustainability.