Sustainable resource management intends to allocate resources in such a way that unnecessary deterioration of biophysical and socio-economical systems is avoided. In Bukoba Area where rainfalls are plenty, evergreen grasslands were expansive and forests were limited, eucalypts (eucalyptus spp.) and pines (pinus spp.) were grown on grasslands for preventing land degradation through deforestation and for providing additional source of income for rural poor. This study shows that in addition to detrimental consequence of eucalyptus and pine forests on soil resources, conversion of Bukoban grasslands to forests has negatively impacted livelihood of the rural poor. Growing eucalypts and pines on grasslands prevented a farming system that enabled integration of grasslands, cattle keeping and crop production. Consequently, the grasslands role of nutrients cycling was disrupted, food crop production reduced, home-gardens productivity declined, majority deprived important livelihood asset and foreign income flow into the area reduced.