Eco-tourism has become an increasingly popular means for local residents to profit from protected areas. This paper described the development of an eco-tourism project, funded by DFID and NORAD, at Budongo Forest Reserve in Uganda. A series of village meetings around the forest led to a development plan for eco-tourism and two sites were opened to visitors, whose numbers grew rapidly from 1995 to 1997. Revenues were split to give 60 % for running the two sites, employing 28 local people, and 40 % to community projects. The authors observed that while the benefits of eco-tourism accrued locally and were ecologically sustainable, they would never match the revenues of timber harvesting. The next challenge was to ensure economic sustainability in the context of fluctuating tourism in Uganda.