Land degradation has long been recognized as a major problem in Ethiopia which threatens ecosystem functions that small holding farmers obtain from their landscapes. For decades a number of solutions have been devised and implemented with varying levels of success. Establishing exclosures (closed to human and animal interference) is one of the major interventions to rehabilitate degraded lands in northern Ethiopia. This paper identifies the reasons why farmers residing adjacent to exclosures participated in illegal wood harvest from exclosures. Despite the fact that a majority of interviewed households agreed on exclosure intervention, illegal wood harvest from the rehabilitating exclosures has been continuously reported. Survey results from 446 households and discussions with key informants and groups of farmers indicated that lack of alternative energy sources was the major driver for illegal wood harvesting. These results indicate that rural energy security is essential for successful restoration programs in Africa. To address this problem, there is a need to balance ecological rehabilitation and local communities’ economic livelihood needs, like fuelwood. Of the respondents 118 (26%) indicated that fuelwood shortage had forced them to use cow dung and crop residues for cooking which in turn negatively affects the fertility of their soils and hence food production. Using renewable energy sources such as biogas, solar panels and agroforestry practices could help narrow the fuelwood supply gaps. Forest landscape restoration is an ideal approach to balance human wellbeing and ecological rehabilitation of degraded rural landscapes.