Participatory forest management (PFM) has been considered a tool of forest conservation. Bonga forest has been under PFM project until 2010 with external support. Since 2010 PFM has continued without external support. This study aims to assess the progress of the PFM approach in improving forest condition and forest based livelihoods in Bonga National Forest Priority Area, Southwest Ethiopia. A combination of forest inventory and household surveys was employed to carry out the study. Vegetation data and socioeconomic data were collected from 53 plots and 141 households respectively. The results revealed that the regeneration of ecologically and economically important species under forest was not satisfactory. The relative forest dependency of non-PFM members is comparable and sometimes greater than PFM members. About 89% of the non-members had illegal access to the forest after the project ended. PFM has brought alienation of de facto forest use rights, and addressing forest condition and forest based livelihoods will necessitate a reconsideration of how PFM establishment is framed.