This paper discusses issues of sustainability and rural tourism within the context of Iran. Using a qualitative research approach, it investigates the experiences of one particular village which is already popular with visitors and has featured in official tourism development plans. The focus is on the reactions of residents and their perceptions of tourism impacts and formal policies. Findings indicate that villagers are concerned about the use of local natural and cultural resources for tourism purposes, recognising negative consequences which seem to them to outweigh positive effects. Participation has been very limited in government rural tourism initiatives which are felt to yield few benefits for village inhabitants. Current policies thus appear ineffective and reforms are necessary if the potential for sustainable rural tourism, embracing community engagement, is to be realised.