Evidence is mounting that traditional knowledge can play a critical role in shaping the biodiversity conservation strategies and maintaining ecosystem services. This study was conducted with Adi community of Arunachal Pradesh (Ar P) state in the Eastern Indian Himalayas to understand as how local systems of forest classification governs conservation tradition and influences subsistence livelihoods. Twenty Adi villages were sampled from East Siang district of Ar P. A total of 197 men and 204 women (total of 401) Adi respondents were selected for this study. A combination of methodologies including in-depth interview, transect walks, focus group discussion, participant observation and informal interactions were combined for data collection. Local forests are classified into 10 different categories based on indicators such as topography, cultural significance, use typology, ownership rights and plant diversity indicators. Local people assign different values (economic, cultural and ecological) to different forest types. Overall, morang followed by regpi and homegardens are perceived to be more valuable to the local needs than other forests with relative ranking of a particular forest reflecting its sustainability. Adis access several diverse services from these community-managed forests. Compared to men (3–35%), the role of women was assessed to be much higher (65 to 100%) in conserving forest biodiversity. Woman-led practices, instrumental in sustainable forest management, included deliberate manipulations of micro-habitats, sustainable harvesting strategies and species domestication. Men were mostly involved in ownership and decision-making roles and in devising social norms to ensure sustainability. Adi celebrate a number of cultural events to sustain biodiversity. Forest-based livelihoods are intrinsically connected to forest resource conservation and are governed by community approaches. Most of the community members gather plants, hunt wild animals and access other ecosystem services from these forests to sustain their livelihoods. Community-owned forests are collectively managed by an indigenous institution ‘Kebang’. Conflicts relating to forest land use and resource management are resolved by the customary chief ‘Gaon Burha’ and his associates using traditional norms. Adi’s system of forest classification, based on ecological, socio-cultural and livelihood indicators, is a location-specific yet comprehensive in nature. Study suggests that integrating the local indicators applied in classifying and strategies applied in managing the local forests can provide valuable insights to the policy makers for the sustainable conservation of forest resources.