There has been much discussion in the environment and development policy arenas on how dependence on natural resources in rural areas of developing countries affects poverty in the long run. With many common property resource conservation and protection efforts underway, policymakers are interested in knowing where synergies may exist between sustainable natural resource use and poverty alleviation. This research aims to provide evidence in this context by evaluating how access to forest capital affects a household’s poverty status and ability to escape poverty traps. While many studies on poverty traps in rural areas focus on the role of financial, physical, human, and social capitals, a substantial proportion of household wellbeing in areas such as the one studied here is derived from natural resources. These are typically omitted from poverty traps discussions. We use an instrumental variables approach, featuring a quasi-experimental fixed effects impact evaluation of Nepal's Multi-stakeholder Forestry Program (MSFP) in over a third of the country in 2012. In this first stage, we find that MSFP causes a three percent increase in household forest dependence and an additional USD17 of forest income per year per household. In the second stage, we find that natural capital reduces the incidence of poverty traps and depth of poverty but increases severity