There are currently strong economic, social and political forces in the Australian forestry sector that are increasing the importance of the small-scale forestry industry. As a distinctive industry within the broader forestry sector, small-scale forestry involves the establishment of smaller size tree plantings on private land, typically associated with farming systems, and multiple-use management objectives associated with the full range of forest resources (both timber and non-timber benefits, including biodiversity). These production and ownership conditions in small-scale forestry are highly conducive to sustainable forest management (SFM). Referring to SFM as incorporating efficiency in the use of forest resources as well as flexibility to generate a range of timber and non-timber benefits, it follows that increased productivity in small-scale forestry will necessarily lead to increased progress towards SFM. Building on theoretical and empirical findings that support the idea of SFM in small-scale forestry, this thesis proceeds to construct an analytical framework based on evolutionary economic concepts in order to understand the long-term development of the small-scale forestry industry. Emphasis is on micro-level processes and system-level sustainability, with the diversity of small-scale forest owner behaviours and techniques, linked to their multiple-objectives, a fundamental property of the systems' interconnectedness. Unifying themes include the coevolution of productivity and SFM in the small-scale forestry industry, the progressiveness of small-scale forestry in terms of SFM as an outcome of innovation and diffusion processes, and self-organisation featuring qualitative systemic change along a trajectory of 'SFM regimes'. The analytical results imply that small-scale forestry policy should be process-oriented and not goal-oriented, experimental, and that policy-makers should pay more attention to their own learning process in order to gain knowledge about the feasibility, social costs and social acceptance of their policies.