Community Forestry, a successful program for protecting and rehabilitating the forests has received highest priority of all the programmes of Nepal’s forestry sector since 1978. Community Forests (CFs) are getting wide attention not only because they constitute a major component of livelihood in the rural areas but also due to emerging policy process such as mainstreaming the climate change issue in development agendas. However, the studies on CO2 sequestration, species diversity, and land use change relevant to CF are limited. Therefore, this study aimed to: estimate carbon deposit in forest, document tree species diversity, map land use change areas in selected CFs, and analyze the role of CFs in CO2 sequestration, biodiversity, and land use change. The major project activities included: review of relevant literature, Focus Group Discussion (FGD) and Participatory Rural Appraisal (PRA) regarding the process of land use change and knowledge of biodiversity among the locals, vegetation survey, interpretation of satellite images, analysis of biodiversity, estimation of carbon deposit, organization of stakeholder meeting and workshop in Kathmandu, and finally report writing. The study showed that CFs have been playing crucial role in increasing forest cover and tree density in public and private lands, and contributing to a substantial increment in carbon sequestration.