This case study refers to the role of Payment for Ecosystem Services (PES) as an economic tool in supporting and promoting sustainable development locally. It was developed for using in both undergraduate and graduate courses in natural resource and environmental economics and economic valuation of ecosystem goods and services. Students should be able to apply their knowledge in basic economic concepts of demand and supply, economic valuation of ecosystem goods and services, as well as basic watershed ecology in analyzing a practical situation provided in the case. Main contents of this case study comprise four parts. The first part is the general information about the study area and the community conservation practices in case of Mae Lao Watershed, Thailand. The second part deals with Payment for Ecosystem Services (PES) in theory and in practice. The third part consists of questions for discussion and group exercises for students to practice. The final part contains the information of teaching note about learning objectives, student audience and background readings.