Dryland species and ecosystems have developed unique strategies to cope with low and sporadic rainfall. They are highly resilient and recover quickly from prevailing disturbances such as fires, herbivore pressure and drought. Dryland people have engineered pastoral and farming systems, which are adapted to these conditions and have sustained the livelihoods of dryland people for centuries. In this article, we present the status of potentials and threats to dryland biodiversity and explore options for its conservation and sustainable use. Findings of the research can be summarized as follows: (i) The ecosystem goods and services are highly valued by the community but mechanism for wise use of the resources has disappeared, (ii) forests are under the ownership of the government but the local community is the realistic custodian of the forests through village leaderships and environmental committees; (iii) the immediate major threat to dryland biodiversity held in the forests appears to be the degradation of ecosystems and habitats caused by new and powerful forces of environmental degradation such as large scale irrigation of rice farms, poverty-induced overexploitation of natural resources, and disappearance and ignorance of traditional institutions for management of dryland biodiversity. These new forms of disturbances often overpower the legendary resilience of dryland ecosystems and constitute potentially serious threats to dryland biodiversity. Forests, wetlands and oases all of which are micro hot spots of dryland biodiversity, appear to be particularly vulnerable hence the need to set up some rules and regulations for sustainable utilization of these resources.