A number of theories have been suggested to explain the nature of residents' perceptions toward tourism impacts. Bystrzanowski (1989a) referred to play theory, compensation theory, and conflict theory, but concluded that none of them were able to provide a theoretical perspec tive that encompassed the phenomenon of residents' perceptions of tourism impacts. Pearce (1989) suggested that attribution theory may be useful, but he did not discuss its application in detail. Preister (1989) has proposed dependency theory, but he recognized that its macro-level orientation may limit its application at the local community level, and that the theory is unable to account for both positive and negative effects. However, Preister did suggest a number of hypotheses to test the application of the dependency framework. Social exchange theory has been considered an appropriate framework to use in developing an understanding of residents' perceptions on tourism (Ap 1990; Nash 1989; Perdue, Long and Allen 1990), and it has been adopted as the framework for development of the model presented in this paper. The advantages of using social exchange theory are that it can accommodate explanation of both positive and negative perceptions, and can examine relationships at the individual or collective level. Therefore, the objectives of this paper are to develop a conceptual model that explains why residents develop positive or negative perceptions toward tourism and to present a set of propositions to test the model.