The importance of natural resources for making a living is crucial among wetland settlers, as various livelihood activities are often highly dependent on locally available natural resources. Traditional utilization of these resources is often based on local wisdom to produce basic products aiming traditionally at serving household uses and local needs. However, this traditional mode of production has been challenged in the face of the overall structural change that forces local people to adjust their lifestyle is response to the market economy. Their increasing need for cash income is apparent alongside with the rising demand of natural products in modern markets. Such situations awaken rural wetland settlers in Southern Thailand to adapt their resource-based livelihood strategies. The key question is how livelihood improvement can reach a satisfied achievement, considering the importance of resource-based local production and the increasing demand of natural products in modern markets. Findings from a research fieldwork conducted in several communities located in the Khuan Khreng swamp, Southern Thailand, reveals that handicraft made of sedges grass widely available in the area has been successful through the transformation of a traditional production to a more modern mode of production that responds better to the increasing demand in modern markets. Production and marketing processes are adjusted in accordance with changes in social structures and functions. Additionally, occupational and savings groups are formed to support these adjustments. The importance of natural resource conservation is also increasingly realized as local people see benefits from the resources for their adapting livelihood strategies. These adaptations are promising for wetland management to promote sustainable livelihoods of local settlers.