The objectives of the present study are to (1) identify and analyze the factors influencing household participation in community forest management programs, and (2) assess the effects of community participation in forest management on household income and poverty levels in Bhutan. The study is based on a comprehensive dataset of 4173 rural households from all the agro-ecological regions of Bhutan. The probit estimation on the factors influencing household participation indicates that educated, young and wealthy households are more likely to participate in the community forest management program. The propensity score matching (PSM) approach was employed to correct for potential sample selection bias that may arise due to systematic differences between the participant and non-participant households. The PSM analysis was carried out by employing different matching algorithms i.e. nearest neighbor matching, kernel-based matching, radius matching and mahalanobis metric matching. The empirical results indicate that participating households have higher income levels in the range of Ngultrum 2605–3169. In addition, the study finds that the participation in community forest management by households may reduce poverty in the range of 5–12 percentage point. The participating households have higher food security levels in the range of 12%–19% as compared to non-participating households.