The present study investigates the perception of local communities and obtains the socio-economic impacts of ecotourism development in Terengganu, Malaysia. Two ecotourism places of Terengganu namely Lake Kenyir and Sekayu Recreational Forest had purposively been chosen for study. A non-probability convenience sampling was adopted for sample selection and a structured questionnaire was administered among 310 respondents to investigate the perception of the local communities. Factor analysis was done to identify the latent constructs and a theoretical Structural Equation Model (SEM) was proposed and tested. Results show that employment opportunities, homestay accommodations, and community participation are some positive socio-economic impacts of ecotourism development. Moreover, degradation of natural resources and break-up of religious traditions have been identified as negative socio-economic impacts. To ensure sustainable ecotourism development and endure the maximum benefit to the local communities, these negative impacts should be minimized. Encouragement should be given to local communities to accelerate the positive impacts of ecotourism.