The tourism industry is the impetus of most economies in southern Africa. In order for the industry to be sustainable and attract more tourists and to continue to provide intra- and inter-generational benefits to host regions, communities and tourists, local communities must benefit from tourism both economically and socio-culturally. Hence, most Southern African development community countries, including the villages of Lesotho, emphasise community-based tourism (CBT). This paper investigates perceptions that Lesotho communities have of tourism development and its impacts on their livelihoods. The study focuses on three villages--Ha-Lejone, Ha-Theko and Ha-Soai--which were included in Phase 1A of the Lesotho Highlands Water Project (LHWP). The study was qualitative in nature and used both desk research and primary data. The desk research involved a review of existing literature on CBT, government reports, and any other published material on the LHWP. Primary data was collected through thematic interviews with households of the three villages around the Katse dam. Tourism has impacted the three communities differently. In Ha-Lejone, tourism has had positive impacts, such as development of small and medium-sized enterprises and development of indigenous knowledge systems. No specific impacts were recorded in Ha-Soai. In Ha-Lejone, tourism has had a negative impact, primarily in the form of noise pollutionKey words: Community-based tourism, tourism impacts, Lesotho, tourism destination life cycle.