Ecotourism has been growing in Yogyakarta that can be seen through the development of rural tourism. The development of rural tourism has positive impact to improve local community’s welfare nevertheless, it has also negative impact onto environmental carrying capacity. Lopati tourism village is located in Bantul, Yogyakarta, relying on traditional craft industry as tourism attraction. Traditional crafts are livelihood of local residents, so that environmental management efforts become part of their daily lives. This research aims to review the roles of community to reduce environmental impacts through analyzing the waste management of traditional craft industry. It used case study method to examine the uniqueness of Lopati village. Data collecting used participatory action research techniques in order to gather information from residents. Community participation acted to anticipate negative impact on development of rural tourism. Waste management in Lopati committed by local residents not to cause adverse environmental impacts. The result show that waste management based on community participation supports the development of rural tourism.
