Abstract: Indigenous fruit tree species have since time immemorial been used as an alternative source of food and nutrition for many people especially in the drylands during droughts when there is food shortage. A better knowledge of the economic viability of Tamarindus indica production is critical for the improved management of this indigenous tree in the north-eastern belt of Uganda. Sustainability of this management will depend on the resources` tangible benefits. This study makes an attempt to compare the net benefits and costs from T. indica in the open woodland and that from the cropland. Production and household surveys were carried out in Kamuli and Kaliro districts from July 2004 to February 2005. Costs and revenues of T. indica production were collected from local cottage firms trading in the product. Net benefits from open woodlands and croplands were determined using the Net Present Value criterion. The estimated mean productions were 127 kg/ha/yr from the open woodland areas and 84 kg/ha/yr for cropland. A significant difference (p< 0.05) was observed between per tree mean T. indica yield from open woodland and cropland sites. The average fodder harvest from open woodland was 2660 kg/ha/yr. The financial NPVs were Ush. 1,791,000 ha ¹ from T. indica products in open woodland and Ush. 1,343,400 ha ¹ for cropland areas (r = 0.0842). These values were larger by Ush 981,400 ha ¹ and by Ushs. 450,800 ha ¹, than the sum of NPV from farm crops and crop residuals of the two sites, respectively. Exporting of T. indica juice could generate foreign exchange of Ushs. 60 ha ¹ and Ush 42 ha^-1 from T. indica in open woodlands and cropland sites, respectively. Rural households earn 74% of their annual total revenue as wage for collecting T. indica fruits. Sensitivity analysis showed that managing T. indica in open woodlands always generates a higher NPV than when left as croplands. Therefore, managing the T. indica stands as open woodlands is a competitive land-use alternative and provides more net benefits than both the croplands and open woodlands.