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In recent years, the Kilombero Valley wetlands in Tanzania was designated and added to the Ramsar convention’s list in an attempt to improve its social, economic and environmental values. This study, carried out in selected sites within the Kilombero Valley wetlands, uses a participatory approach to analyze the existing situation and to reflect upon the quest for sustainable management as defined by Ramsar convention. The empirical findings reveal that the Kilombero Valley wetlands are an important source of livelihood for 87% of the dwellers in the area. Moreover, the wetlands also contribute significantly to welfare outside the area as 70% of the country’s hydropower depends on water regulation functions of this wetland and they are the source of a diverse number of streams, adding to their biological and ecological value. The study furthermore revealed that the current institutional arrangement for the site threaten the sustainability of the wetlands, despite its addition to the Ramsar convention’s list. A more detailed study on appropriate incentive mechanisms for the sustainable management of the wetlands, which would help to internalize the negative effects created by the users, is recommended.