Protection of forests and wildlife outside protected areas (PAs) is necessary for the conservation of wildlife. Extension of conservation efforts outside the existing PA may result in restrictions on local forest resource use. Such situations arise due to differences in understanding of forest as a resource for communities and as a conservation space for endangered species. A clearer focus is needed on the functionality and socio-ecological outcomes of different forest management institutions to address such issues. We conducted a study in a forest landscape connecting Pench and Tadoba-Andhari Tiger Reserves (TRs) in Central India. The two main forest management institutions were the Forest Department (FD) and local communities managing forest resources. We conducted vegetation surveys and focus group discussions in 15 villages selected based on presence or absence of active protection and monitoring of forest resources by either FD or local people. We found that forests with monitoring had significantly higher tree density and vegetation species richness compared to forests without monitoring. Tree density was observed to be higher in sites monitored by villagers rather than those monitored by FD. Self-regulation and resource sharing in locally monitored forests were more acceptable to local communities. In forests monitored by the FD, local communities indicated a feeling of alienation from the forest that weakened their motivation to protect the forest and wildlife. Recognition of local community rights is essential to achieve conservation goals and reduce social conflicts outside PAs, requiring collaboration between state and local institutions.