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Forest lands in Indonesia are classified as state lands and subject to management under agreements allocated by the Ministry of Environment and Forestry. There has been a long-standing tension between the ministry and local communities who argue that they have traditionally managed large areas of forest and should be allowed to continue to do so. A series of recent legal and administrative decisions are now paving the way for the allocation of forests to local communities. There is a hypothesis that the communities will protect the forests against industrial conversion and that they will also conserve biodiversity. This hypothesis needs to be closely examined. Conservation of biodiversity and management for local benefits are two different and potentially conflicting objectives. This paper reviews examples of forests managed by local communities in Indonesia and concludes that there is very limited information available on the conservation of natural biodiversity in these forests. I conclude that more information is needed on the status of biodiversity in community managed forests. When forests are allocated for local management, special measures need to be in place to ensure that biodiversity values are monitored and maintained.