Non-timber forest products (NTFPs) constitute the single largest determinant of livelihoods for scores of forest fringe communities and poor people in the tropics. In India over 50 million people are believed to be directly dependent upon NTFPs for their subsistence. However, such human dependence on NTFPs for livelihood gains (win) has most frequently been at a certain ecological cost (lose). If livelihoods are to be maintained, the existing ‘win-lose’ settings have to be steered to a ‘win-win’ mode, otherwise, there could be severe erosion of the biological resources and loss of livelihoods (‘lose-lose’). Examining the dependence of forest fringe communities on NTFPs at three sites in south India with contrasting human and ecological settings, three key factors (extent of dependence on NTFPs, indigenous ecological knowledge and market organization) are likely to constrain reaching the win-win situation. How these factors shape the ecological cost of harvesting NTFPs at the three sites is examined. Within the parameter space of these factors, it is possible to predict outcomes and associations that will conform to win-win or win-lose situations. Empirical data derived from the three study sites demonstrate the causality of the observed associations. The key for long-term livelihood gains lies in reducing the ecological cost. Certain interventions and recommendations that could optimize the balance between livelihood gains and ecological cost are proposed.