Recent discussions of local knowledge emphasize its dynamic nature invoking local peoples' ability to effectively integrate traditional or local with science-based or "modern" knowledges. The smallholder timber industry of the Amazon's estuarine floodplain provides an outstanding example of local patterns of resource management and economic activities transformed from within by smallholder farmers who participated in the industrial timber boom of the 1970s and 1980s. These farmers of eastern Amazonia have developed a vertically integrated local industry based on expertise reflecting profound locally developed knowledge of specific forests and management of ecological processes, individual observation and experimentation, as well as concepts and practices derived from temporary employment by large-scale industrial timber firms. At each stage of the smallholder forestry process - from managing natural regeneration to running small sawmills and marketing lumber - local managers apply an innovative set of practices reflecting their diverse experiences. This combination of technical, market, and ecological knowledge results in forests, timber markets, and economic patterns that do not correspond to many of the widely-held generalizations concerning either local or industrial tropical timber exploitation. This article uses data from 7 years of research in the Amazon floodplain. © Springer Science+Business Media, LLC 2007.