The development of an effective and equitable payment mechanism is one of the most important but challenging aspects of the REDD+ (Reducing Emissions from Deforestation and Forest Degradation and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries) readiness process. This is particularly true in Nepal, where local communities have been managing small patches of forests under different tenure regimes. While different tenure regimes would call for correspondingly different benefit sharing arrangements, this discussion paper documents the experiences in regard to a pilot project on REDD+ benefit sharing in community forestry that was implemented by ICIMOD (International Center for Integrated Mountain Development) and its partners over the past three years. The project established a pilot Forest Carbon Trust Fund (FCTF), developed a mechanism for fund distribution, and provided the first installment of REDD+ payments to community forest user groups (CFUGs) in the three watersheds of Nepal, namely Charnawati in Dolakha, Kayarkhola in Chitwan and Ludikhola in Gorkha districts (Skutsch et al. 2012). CFUGs in these sites have started to use the fund in various activities as prescribed in the operational guidelines of FCTF (ICIMOD et al. 2011)