The main objective of this study was to asses and quantify the contribution of private woodlots to the economy of Mufindi district in the Southern Highlands of Tanzania in year 2008. The specific objectives were, to examine and quantify the levels of woodlot ownership coupled with capital asset acquisition, to asses and quantify the rates of tree planting in relation to the utilization rate by value added activities, to asses and quantify the contribution of private woodlots to the communities in terms of employment and revenue generation, to determine the contribution of woodlots to timber supply in Mufindi district, and to examine the actual and potential revenue contribution of private woodlots to the district. Data was collected using semi structured questionnaires in which a random sample of 270 households out of 900 in six villages and 30 traders were interviewed. A checklist was used to interview the key informants who included the village leaders, district natural resources officer, district trade officer. Other methods used in gathering information were personal observation and focused group discussion. The data was analyzed using the SPSS programme version 12.11 and EXCEL programme. Descriptive statistics such as frequencies, percentages and means were used to make inferences about the studied Woodlot owners. The study showed that 14.1 % of the woodlot owners were females, and 85.9% were males. Woodlots were planted on land acquired through inheritance, village allocation, and buying, and most of this land was former agriculture land. Average land size owned per household was 6.80 hectares and the average woodlot size was 2.60 hectares, thus, 36 % of the land was occupied with woodlots. Most of the woodlot owners started planting woodlots in years 1991 to 2008. Timber supplied from woodlots was 92% for the transmission poles while contribution of wood destined for sawn wood was less than 1% compared to Government plantation. However, the study revealed that the planting rate was higher compared to the utilization rate, implying that there was more young stock compared to old stock. Furthermore the study showed that woodlots had created on average 5414 employment opportunities at farm level, while 120 permanent and 600 part time employment opportunities were created by processing units. Furthermore, the survey showed that 90% of the traders sold their produce through middlemen and this was done at production sites. Timber was mainly destined for local markets and Kenya. The survey revealed that the average income derived from sale of woodlots was Tsh. 232 143 and Tsh.455 452 for years 2007 and 2008 respectively. Revenue to the district accrued from sale of sawn wood and transmission poles collected, as cess was less than 1% of the potential revenue. Given the potential that woodlots have in improving the economy in resource poor areas, this study recommends increased establishment of woodlots and improved management in Tanzania while observing the land use plans, in order to exploit market opportunities tenable, because products have a big market inside and outside the country