Devolving governance from the state to local communities is an increasing trend in forest and natural resource management. Effective local institutions are widely accepted as being key to the success and sustainability of these governance transitions, but there is limited understanding of how different kind of community institutions evolve with community forestry processes. This paper investigates the processes of evolution of three interlinked community institutions in the Hutan Kemasyarakatan (Community Forest) program, referred to in this paper as CF, in Gunungkidul district in Java, Indonesia. CF in this district is further advanced than in other regions in Indonesia. Data from documents, 66 interviews, 2 workshops and other observations were used to analyze CF transition processes involving the evolution of three kinds of interacting community institutions. Results show that the interplay of complex factors (such as starting points, leadership, networks and external support) influenced these processes. Three institutions: forest user groups (Kelompok Tani Hutan), cooperatives (Koperasi) and a CF leaders network (Paguyuban), played different roles in change processes. Community actors, operating in complex and dynamic institutions and receiving support through interaction with external actors, evolve and develop to function effectively. These findings have practical implications for designing institutions to support CF. Achieving the aim expressed by the Government of Indonesia of empowering local people through CF requires a balance between externally-supported local community institutions that often start out poorly developed, and long term strategies to enable communities with limited resources to build capacity to drive CF without external support.