Institutional conflict is a major facet of tropical resource management regimes, and mediation of such conflicts is a rarity. Using the Kakamega forest belt as a case study, it emerges that forest biodiversity in a tropical country like Kenya is associated with a number of benefits and these are central in the framing of the institutions at both the national, regional and local levels. Because these are structurally different, they in most cases, represent the cause of institutional conflict. Indeed this demonstrates the biggest challenge in the management of tropical resources- that is absence of institutional mediation mechanisms. This is the central cause of institutional dysfunctioning in tropical resource management. Hence, institutional options targeting forest biodiversity management should be locally adapted and centrally and/or regionally mediated, because of the role local forest resources play in the lives of local forest-user communities.