Abstract: Mountain forests are characterized by multifunctionalities and play crucial roles in the sustainable development of mountain regions. In addition, they also serve as the ecological defense for the areas downstream. Mountain forests are usually very limited in arid lands, and they are of special value to the local people. They should be well protected and managed. As a result, many mountain forest development models have been worked out or identified around the world, including legislation/law, multifunctional land use strategies, support/extension, community organizations, economic instructions, coordinated knowledge sharing, and even religious practices. In northwest arid China, high mountains are the basis for the existence and development of oases, simply because the high mountains provide nearly the only water source for oases. And mountain forests are the key body of mountain systems. Their multifunctionality includes production, ecological protection and welfare. The Oytag Valley is one of the few forest areas in western Kunlun Mountains and very close to the population center of Southern Xinjiang. Since the 1950s, forests in the valley have experienced marked changes. Large-scale deforestation began in 1954 and culminated in 1958-1960. Investigation shows that almost all usable trees were cut in the process. It is 1979 that deforestation was stopped and in 1992 forest regeneration was started. But contradictions stand out among forestry, animal husbandry and tourist development. Animal husbandry is now the backbone of the economy of the Oytag valley and needs considerable area of pastureland to support its development. Forest regeneration needs to fence some of the forestland, which has served as pastureland for a long time. Thus contention for land arises. Besides, domesticated animals often go into the fenced forestland and tread the seedlings of spruce, impacting forest regeneration. Moreover, the increasing number of tourists exerts pressure to the environment of mountain forests. Forest sustainable management asks for proper coordination of the relationship among forestry, animal husbandry and tourism. It is in this valley that a model has been developed for the sustainable management of mountain forests during the process of coordination of forestry, animal husbandry, tourism and local people's daily life. The related stakeholders jointly manage the forests and tourism and share the benefit from the tourism. The sustainable development of mountain forests in northwest arid China consists in (1) increasing the awareness of mountain issues and mountain forests; (2) setting in motion compensation mechanism for mountain forest management at regional level; (3) resolving the problem of land contention between forestry and animal husbandry; (4) dealing with the problems of subsistence and development of mountain forestry;and (5) restoring forests below the present forest belt.