Since 2012, local households, communities and individuals have received a rather large revenue per year from the payment for forest ecosystem services (PFES), of which only a small amount was reinvested in the development of local production to sustain local sustainable livelihoods. Given a limited access to available financial sources, PFES payments seem a potential source of funding for the community’s production development through a Community’s Livelihood Development Fund (CLDF). Experience gained by some localities in the use of PFES payments for developing their production through CLDF has proved many positive results. Nevertheless, there also remain several issues related to the legality of CLDF, the mobilization and/or the use of PFES payments through CLDF for local production development that needs to be further clarified and addressed. This paper aims to discuss proposed policy recommendations on the legal status of CLDF and the use of PFES payments for local livelihood development.