Conflicts between local people and protected area managers are a common problem in developing countries, but in many cases there has been little attempt to comprehensively characterize the underlying problems. Resource uses, management practices, economy and people's perceptions of problems and likely solutions were analysed in two villages near and two villages away from the core zone of Nanda Devi Biosphere Reserve in the Indian Himalaya. Agriculture, although practised on less than 1% of the area, was the primary occupation of local people. Six annual crops of a total of 22 and all four horticultural crops on private farms were damaged by wildlife, but Reserve management provided compensation only for livestock killing by wildlife and compensation amounted to only 4–10% of the total assessed monetary value of killed livestock. A variety of wild plant products were used locally but 27 were marketed by more than 50% of surveyed families; income from wild products was substantially lower than that from crops and livestock. A sociocultural change from a subsistence to a market economy, together with changes in traditional land/resource rights and institutions, has led to a number of changes in land-use and management practices. The livestock population has declined, agricultural area has remained the same and people have started cultivating medicinal species in the last 20 years. These changes seem complementary to the goal of conservation. However, changes such as abandonment of some traditional food crops and stress on cash crops lacking fodder value, requiring substantial manure inputs derived from forest litter and livestock excreta, and causing severe soil erosion, seem to counter the goal of environmental conservation. Some government-managed Reserve Forest sites were similar to the Community Forests in terms of species richness, basal area and soil physico-chemical properties. Two Reserve Forest sites showed basal areas of 160.5–191.5 m2/ha, exceeding the highest values reported so far from the region. The formal institutional framework of resource management seems to be not as effective as the traditional informal system. The Reserve Management Plan lays more emphasis on legal protection than on the sustainable livelihood of local communities and has led to conflicts between local people and reserve managers. Plantation of fodder and medicinal species in degraded forest lands, suppression of economic exploitation of local people in the market, enhancement of local knowledge of the economic potential of biodiversity, incentives for cultivation of crops with comparative advantages and lesser risks of damage by wildlife, and rejuvenation of the traditional involvement of the whole village community in decison-making, could be the options for resolving conflicts between people and protected areas in this case.