This study assesses the dependency of farmers on bamboo resource for rural livelihood in Lalitpur district of Nepal. Bamboo is known as a key resource for people and it is one of the income generating sources for poor and landless people in Nepal. Many rural communities of Nepal have been cultivating and managing bamboo in homesteads as well as in Community Forests (CF). The study is based on the sustainable livelihoods approach and employed qualitative and quantitative research methods. A total number of 71 households from 3 villages in Badikhel Village Development Committee (VDC) were selected from Pahari caste for this research. The study found that bamboo craftmaking is the traditional occupation of Pahari households (producing handicrafts such as dalo, naglo, chalno and rack). The study further shows that bamboo craftmaking significantly contributes to the livelihoods of poor Pahari households (e.g. to cope with food insecurity), however, their income from bamboo crafts is lower compared to medium and rich wealth categories. Reasons are small landholding size, lack of adequate knowledge and skills, lack of bamboo raw materials, market and financial support to run the enterprise in a sustainable way. As the Community Forest User Groups (CFUGs) started large scale bamboo plantation in CF, increased timber price and increased demand for handicrafts in urban areas increased, which is a high potential for selling bamboo culms for supplementing timber and crafts in future.