In rural areas of the Ethiopian highlands, tree planting on communal land has been increasing because of active implementation of various sustainable land management projects. Tree planting requires negotiation or coordination among the users of communal land because it may exclude other activities, namely grazing of livestock. This study empirically shows that the transaction costs to reach agreement among land users deter the expansion of tree planting.In other words, tree-planting projects tend to be placed in communities with lower transaction costs. The result implies that tree planting will expand if public policy is directed toward coordinating diversified opinions among community members.