Tourism plays a critical role in social-economic development in both developed and developing countries. Recently, Laos, a developing country, has embraced tourism as a tool for socio-economic development and launched a number of tourism projects, one of which is the Sustainable Tourism Development Project (STDP). This project was aimed at contributing towards the sustainable socio-economic development of the country, focusing especially on poverty reduction, sustainable development and protection of natural and cultural heritage. However, do such initiatives result in the long-term benefits for the host community? This research employs a qualitative approach to examine this question. The study focuses on four overarching themes: community participation in CBT, supply chain in CBT, benefits of CBT, and assessment of the effects of the STDP in a case study community: Naduang Village, Vang Vieng District, Vientiane Province. Participant observation and in-depth interviews with 20 participants who are involved in community-based tourism activities were used. The findings of this study reveal that local residents understand the nature of community-based tourism well. They recognise what they should contribute to and can gain from their participation in tourism. However, the involvement in the decision-making process of villagers in community-based tourism is limited, other than the Village Authority. This research also finds that the tourism supply chain in Naduang Village is largely informal, formed by internal and external stakeholders. The internal stakeholders comprise CBT groups, whose tasks make up the key components of CBT activities, while the external stakeholders consist of tourists, private tourism companies, traders, and suppliers whose activities play a part in CBT in Naduang Village and the Lao government. Further, the findings suggest that community-based tourism has considerable advantages to not only internal stakeholders who are directly involved but also to those in the village who are not directly involved in CBT activities. Additionally, tourism benefits the external stakeholders. More importantly, participants have claimed that the CBT activities will continue to grow even though the aid funding has stopped since they have more experience and awareness of the importance of tourism to their community. The income and other benefits from tourism are not central to their livelihoods but are a secondary source. Nonetheless, three main points need to be addressed in order to improve CBT activities in Naduang Village, namely amenities improvement, CBT activities diversification, and improvement of financial management. The key contribution to literature of this research is the exploration of the gaps in literature regarding the informal economy and the supply chain for community-based tourism. The research reconceptualises community-based tourism as one element of a sustainable development system which cannot be separated from either the goods and services or the informal economy, which interfaces with the external, formal tourism industry. All are held together by the strength and power of relationships within social networks.