The Forest Department in 1986 commenced social forestry programme in the Kirindi Oya Irrigation and Settlement Project (KOISP) in Sri Lanka. Under the programme, establishment of the woodlots was undertaken in view of the future shortage of forest products and potential environmental hazards. Raising tree crops together with field crops in "taungya" system was the main objective of the woodlot development. The project identified 400 ha of land with the help of farmers and distributed the lands among 540 farmer families. The land was initially given on 5 year lease which would be extended to 25 years based on performance. The farmers were allowed to obtain crops, small woods and fuelwood for their daily consumption. The project has rated the success of wood lot development over 70 per cent nearly after one decade. Extent planted compared with extent allocated and survival rate of trees have been taken as the main parameters for the evaluation. However, even before the halfway of their tenure, the farmers are in a dilemma on the future prospects of the woodlot with population pressure and acute poverty. This paper is based on an exploratory study on woodlot development programme and perception of local people involved with the programme. Farmers' perception of the woodlot development in terms of environmental protection, future economic benefits and usufruct rights is discussed. Communication gap is explored as user knowledge of available technology, management of interface between research and users, sharing of knowledge with farmers etc. Eventually, need-oriented participatory research based on agronomic/land use system, prevailing socioeconomic conditions and institutional development are proposed.