Study on the performance of the rubber wood processing sector in India was based on the field survey conducted during 1995-96 covering Kerala, Tamil Nadu and Karnataka. Most of the units have been set up during early 1990s and 72 per cent were in Kerala due to obvious locational advantages. Primary log market is characterised by the dominance of intermediaries resulting in a higher proportion of indirect procurement and relatively higher price. Most of the units used indigenous technology while only 43 per cent of the units had downstream manufacturing facilities and the products manufactured were generally low value-added items. The industry is oriented towards internal market where lack of acceptance is a major hurdle. The operational level constraints faced by the industry were reflected in a lower capacity utilisation at 51 per cent. Policy options related to technology, marketing and institutional intervention which are necessary to attain maximum commercial exploitation of eco-friendly by-product of rubber plantations are discussed.