Although payment for ecosystem services (PES) is a globally-recognized mechanism for effective forest protection (e.g., REDD + for forest carbon), implementation can be challenging, especially on a local level. This study examined community perceptions of and willingness to participate in PES-project development for protection of a watershed forest at Phu Kao (PK) in northeast Thailand. Semi-structured interviews were conducted with 404 household representatives from 10 villages in or near PK during 2018 and 2019. Although PES-project development is a new concept at PK, we received positive responses from the villagers. Estimated amounts of willingness to pay (WTP, n = 204) were smaller than willingness to accept (WTA, n = 200). Income constraint was the main factor limiting WTP, followed by perceptions that forest protection was the government’s responsibility, and lack of understanding/trust on PES implementation. Meanwhile, benefit reduction, especially food sources and income generated from non-timber forest products, hindered WTA. PES-development, at least in the early stages, requires a proper balance of technical expertise, governmental intervention, and long-term commitment from relevant stakeholders. Project failure is likely without a good understanding of community perceptions and capacity building.