Oil palm plantations can be a significant contributor to rural livelihoods in Indonesia. The government seeks to capitalize on this commodity and strengthen Indonesia’s position as the global leader in palm oil production by expanding plantation estates. As the land for new plantation investment in Kalimantan and Sumatra becomes scarce, plantation developers are looking east to acquire land in Papua Province. The rising interest in oil palm plantations in Papua presents potential opportunities but also poses challenges. Drawing on research findings from Boven Digoel District, one of the key areas for oil palm expansion in Papua, this paper illustrates the dilemma of plantation development in the region by examining the social, economic and environmental impacts. Plantation development in Boven Digoel District has opened up isolated areas, stimulated the development of infrastructure, generated employment and improved worker incomes. However, the indigenous communities’ reliance on forests for subsistence and their lack of familiarity with oil palm as a cash crop has proven to be a major barrier to effective engagement of the local population. In addition, the decision by the company not to implement an outgrower scheme has led to limited community involvement, rising tensions about land acquisition processes and resentment about low compensation payments. The development of oil palm plantations has also resulted in deforestation and other negative environmental impacts, such as poor water quality, air pollution and soil erosion. Reducing environmental damage and creating better conditions for the productive engagement of local communities are major challenges for plantation investment in forested frontier regions such as Papua.