Participatory forest management (PFM) is being promoted throughout Tanzania as a means of achieving conservation and improving livelihoods. This paper presents the results of a study in nine villages in the Eastern Arc Mountains to investigate the impacts of two institutional forms of PFM — Joint Forest Management (JFM) and Community-Based Forest Management (CBFM) — on the livelihoods of different well-being groups within communities. PFM was found to provide a new, though small, source of community-level income that was used to improve community physical capital. Household incomes from PFM forests generally increased slightly for most groups. However, technical and administrative obstacles prevented the poorest from taking full advantage of the benefits of forests under CBFM, while benefits from JFM-related income-generating activities were captured by village elites. Overall the results suggest that PFM implementation in Tanzania is improving forest conservation but not realising its potential to contribute to reducing poverty and social exclusion and, in the case of CBFM, may even be increasing the gap between rich and poor.