This study examines the use of commercial and domestic wood in nine research areas located near native Andean forests in Ecuador, its importance for the rural economy, and its relation to the pronounced deforestation process. The sale of charcoal for commercial use in restaurants is the prime source of income for producers, and may accelerate deforestation near cities. In turn, timber and firewood are of negligible commercial importance. In general, income from wood represents a temporary resource, confined to early stages of agricultural frontier expansion, and provides income that tends to be reinvested in agriculture and particularly cattle ranching. The conversion of forests into pastures is the predominant long-term land-use change in the highlands, and this increases the commercial integration with urban markets. Public institutions in Ecuador generally have reinforced this deforestation for pasture through credit and tenure incentives and by poor forest administration practices. The main domestic wood use is firewood, but it is almost always combined with bottled gas as a fuel source so that it has little impact on forests. It is concluded, therefore, that deforestation in the highlands of Ecuador is dominated by the demand for agricultural land and cattle ranching, whereas only in exceptional cases are requirements for wood the motivation for forest conversion.