Sustainable use of forest resource products such as timber has been reported to produce different benefits, which enhance households’ income and reduce poverty. This study assessed the influence of timber trading on poverty reduction to the selected communities in Mufindi District, Tanzania and its contribution to district revenue. As well the study focused on the challenges and opportunities to timber trading in the study area. Structured questionnaires and checklist were the data collection tools used. A sample of 100 households engaged in timber trading was randomly selected from four villages for a questionnaire survey. Observation and focus group discussion (FGD) were other methods employed. Descriptive statistics and comparative analysis were used to analyze data and compare relationships between and among variables. Quantitative data were analysed using computer program Statistical Package for Social Sciences (SPSS). Qualitative data analysis was subjected to content analysis. Results show that timber trading contributed to 61% of the households’ income. 73 percent of households’ physical assets were acquired using income accrued from timber trading. Besides, timber trading contributed up to 35% of the district own sources of revenues. However, access to credit facilities by timber traders was very weak. Increase in the price of fuel, price of buying tree plots and poor infrastructure led to an increase in the costs of timber production. The situation decreases both household income and district revenues in terms of log cess (levy). Moreover, revenue collection from private owned wood lots remained a challenge to district council authority. It is recommended that package of Small and Medium Enterprises (SMEs) business support programs, extension services and cost-effective technological support is provided to timber traders in the district to accelerate the meeting of the national strategy for growth and reduction of poverty (NSGRP) and realisation of Millennium Development Goals (MDGs).