This paper examines the challenges of achieving sustainable management of the world's largest mangrove forest, the Sundarbans (SMF) in Bangladesh. During the past two decades, conflicts between mangrove maintenance and the pressure to provide economic livelihoods to forest-dependent communities (FDCs) have emerged and persisted. The SMF is currently managed by the Bangladesh Forest Department (BFD) under a state property rights regime. This study explores an alternative property rights regime which includes participatory approaches and co-management with FDCs to achieve sustainability, both economically and environmentally. Focus group discussions and a survey were the methods used to assess the prospects. The study finds that the absence of a management partnership between the BFD and FDCs is mainly responsible for the policy failures to achieve sustainable management of the SMF. However, evidence is presented that a 'co-management' property rights regime cannot be established until FDC capacity is enhanced through the formation of community level institutions.