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The analysis of `ambiguous lands' and the people who inhabit them is most revealing for understanding environmental deterioration in Thailand. `Ambiguous lands' are those which are legally owned by the state, but are used and cultivated by local people. Land with an ambiguous property status attracts many different actors: villagers hungry for unoccupied arable lands in the frontiers; government departments looking for new project sites; and conservation agencies searching for new areas to be protected. This article shows, first, how two types of ambiguous land - state-owned but privately-cultivated land, and communal lands - were created. It then examines how the Karen, one of the hill peoples living on the ambiguous lands, have been struggling to survive between the forces of capitalistic development and forest conservation. Using a detailed study of forest use and dependency conducted in two Karen villages, I argue that the state's efforts to reduce the Karen's forest dependency, or even to evict them from the forests, are not leading to the stated objective of conservation. Finally, I draw some wider implications with reference to James Scott's thesis on state simplification.