Forest management policy in Nepal’s Terai region has witnessed increasing conflicts and contested debates, particularly over who should manage the region’s valuable forests. While the government advocates collaborative management in the form of a partnership between the government itself and the local communities, community forestry activists oppose this model and argue instead for total community control of local forests. One way of overcoming this policy impasse is to look back and reflect on how past forest politics and policy affected local people and forests. This paper attempts to explore historically the impacts of past forest politics and policy on social equity and ecology, in hopes to provide an insightful opening to a more reasoned discussion. It is suggested that past forest politics and policies may continue to influence the forest bureaucracy in Nepal and, hence, shape present-day forest management in the Terai. The paper argues that Terai forestry has historically been an inequitable sector, principally benefiting the state and the ruling class, with ordinary Nepali people not receiving a fair share of the benefits. In the context of the rapidly changing political transformation in Nepal, with major political actors, including the Maoists, agreeing to a major restructuring of the state, the paper argues that it would be a blunder to overlook the history of Terai forestry, in particular issues that have a bearing upon transparent and accountable forest governance. It is argued that more open, proactive and deliberative dialogue between the various stakeholders of Terai forestry is the key to exploring and understanding the intricacies of the consensual model of forest management in the region.