Employment and income from non-farm activities are of increasing importance in the rural economy of developing countries. Small forest-based enterprise activities constitute one of the largest sources of such income. They also account for a large part of the total harvest from forests in many areas. Many agriculturalists supplement their income through gathering and trading products such as forest foods, medicinal plants, and fuel wood. Small-scale manufacturing of items such as furniture, baskets, mats, and craft goods constitute substantial informal sector industries. Income from these activities tends to be particularly important during seasonal shortfalls in food and cash crop income and in periods of drought or other emergencies. Ease of access to forest raw materials means that forest-based activities are particularly important for the poor and for women. However, some of the simpler activities provide very low returns to labor, and may thus provide only minimal and short-lived livelihood contributions. Some of the most important saleable forest products face uncertain markets because of growing competition from industrial or synthetic alternatives or domesticated sources of the materials. As demand grows, some activities are also threatened by depletion of, or reduced access to, forest resources. In developing policies in support of sustainable activities, it is therefore important to be able to distinguish between those that have a potential to grow and those that do not. Policy issues include regulations that discriminate against the informal sector, policies that result in the shift from managed to uncontrolled open access use of forest resources, and restrictions on private production and sale of forest products that impede the development of farm-based sources of these products.