In 1993 the Swedish parliament deregulated national forestry policy and established an environmental goal in parallel with the previous, long-standing goal of high wood production. This paper shows how the change occurred in the context of major changes in Swedish environmental policy during the late 1980s and early 1990s. Within a short time, new environmental legislation and the introduction of legal protection for small forest and agricultural habitats of high ecological value reoriented national forestry policy, away from an overriding focus on wood production to an increased awareness of nature conservation and biodiversity preservation. Reflecting a major compromise with the state, forest owners have gained greater freedom to manage their land, but must also improve environmental conditions while achieving high wood production, a policy known as 'freedom under responsibility'. The paper explains how both the parliament and industry supported increased nature conservation and biodiversity to maintain forest health and support the forestry industry, by favouring responsible resource use and not simply protection from human influence.