We investigated the participation of local ethnic groups in wetland conservation, determined the economic benefits that they received from the wetlands, and assessed socioeconomic factors that affect dependency on wetlands. A total of 217 wetland resource-user households residing around Ghodaghodi Lake, western Nepal were surveyed. Data were analyzed using descriptive statistics, t-tests and ordinary least squares regressions. The wetland resources contributed significantly to the household economy of the local people. Each household extracted lake resources at an annual worth of NPR 4379 ($63 USD), equivalent to 12.4% of the household total gross income. Although the people maintained a positive attitude toward wetland conservation, their participation in conservation efforts was inadequate. Socioeconomic factors such as larger household size, older age of the head of the family, and larger area of agricultural land increased the rate of resource extraction. In contrast, when households were involved with local conservation organizations, resource extraction was reduced. We recommend the following resource conservation and livelihood strategies: implementation of community-based conservation approaches to increase system productivity, adoption of biogas plants, and improved cooking stoves to reduce fuelwood consumption, coupled with conservation awareness programs.