Palm oil is the world's most important vegetable oil in terms of production quantity. Indonesia, the world's largest palm-oil producer, plans to double its production by 2020, with unclear implications for the other national priorities of food (rice) production, forest and biodiversity protection, and carbon conservation. We modeled the outcomes of alternative development scenarios and show that every single-priority scenario had substantial tradeoffs associated with other priorities. The exception was a hybrid approach wherein expansion targeted degraded and agricultural lands that are most productive for oil palm, least suitable for food cultivation, and contain the lowest carbon stocks. This approach avoided any loss in forest or biodiversity and substantially ameliorated the impacts of oil-palm expansion on carbon stocks (limiting net loss to 191.6 million tons) and annual food production capacity (loss of 1.9 million tons). Our results suggest that the environmental and land-use tradeoffs associated with oil-palm expansion can be largely avoided through the implementation of a properly planned and spatially explicit development strategy.