At present, Indonesia still applies the state-based paradigm of forest management. When the State takes full control of the forest management, it causes mismanagement, such as forest degradation and deforestation, displacement of local communities from their lands, loss of biodiversity, and forest fires. This paper proposes a new paradigm of forest management in Indonesia that is based on local wisdom. A review of the literature was carried out in which the following were discussed in detail: local wisdom, the decentralization of forest management in the era of autonomy, and the status of tribal peoples in relation to forest management. This paper argues that there are several challenges to the paradigm shift in forest management, which include (a) a narrow interpretation of Article 18B, Paragraph 2, and Article 33, Paragraph (3) of the 1945 Constitution of the Republic of Indonesia; (b) regional regulation of the legalization of tribal peoples; (c) the strong influence of the principle of state-owned property (domein verklaring); and (d) the lack of participation of tribal peoples. Four solutions are proposed toward building a new paradigm of forest management in Indonesia: (a) a broader reinterpretation of Article 18B, Paragraph 2, and Article 33, Paragraph 3, of the 1945 Constitution of the Republic of Indonesia; (b) simplification of the legalization procedure for tribal peoples; (c) mechanism implementation of the state owned principle; and (d) optimization of the participation of tribal peoples in a co-management system.