This study was carried to find out the impact of PES (Payment for Environmental Services) on the welfare of the communities in the Uluguru Mountains. The aim of the study is to assess the main objectives of the PES project which is to conserve the environment (forest) and reduce poverty. The assessment of the project is done by looking on the difference between the treatment group (those who participate in PES) and control group (households who do not participate). The study employed a combination of questionnaire and field observation to collect primary data together with a detailed review of literature. The study utilized Propensity Score Matching (PSM), Descriptive statistics, Perception and Logistic analysis. In all the methods of analysis the results shows that there is a significant difference in the poverty status between treatment and control groups with treatment groups showing low level of poverty. In the regression analysis it is shown that participation into the programme, age of the respondents, the level of dependence on natural resources are found to significantly reduce poverty.