The Sundarbans has a tremendous impact on the ecosystem of this country, region and the world as a whole. It provides livelihoods to the local and national economy. The Paper demonstrates that poverty levels of Sundarbans Impact Zone (SIZ) areas, compared to non-SIZ areas, are quite high. Naturally, the issue arises as to why the SIZ population is living in poverty and whether issues related to Sundarbans Reserve Forest (SRF) extraction activities have any bearing on this poverty situation. This Paper is an attempt to explore this through undertaking value chain analysis. The study on which this Paper is based aimed to understand and, where possible, quantify the economics of extraction and sale of products marketed from the Sundarbans. The Paper suggests that there are more than one million people directly involved with the resources extraction from the SRF. About 28% of the population in the impact zone are dependent on the SRF, and in future this dependence will increase, which is likely to aggravate the existing pressure. The increased population with few alternative livelihood opportunities poses a serious threat to the Sundarbans which is the main cause of mangrove destruction. The people and the community especially that of the bottom layer actors in the value chains, tend to fall in the process of pauperization. The income distribution appears to be highly skewed in the SIZ area. While the bottom half (Deciles 1 to 5) of the actors have 15 percent of the total income, the top half (Deciles 6 to 10) of the actors accounts for as much as 85 percent of the total income, with Gini coefficient for the SIZ area estimated as 0.52, as compared to 0.46 for Bangladesh, as a whole. Intuitively, given the existing economic situation, SRF extraction is deepening poverty levels, which may help widen the income gap between rich and poor in the SIZ area. The Paper raises issues that are crucial in terms of return and equity, conservation and co-management, and suggests specific policy interventions in respect of, among others, improving the value chains and poverty situations of SRF actors (particularly of bottom layer actors), improving terms of trade and marketing system, conservation of the SRF and capacity of the FD, in order to help ensure improved and collaborative management of SRF and sustainable use of its resources.