Sustainable ecotourism has been considered an alternative approach to tourism development specifically to enhance community benefits vis-a-vis the protection of natural and cultural heritage in the indigenous settlements. This study takes the case of the indigenous communities of Xishuangbanna to examine the potential community benefits of ecotourism development and the key issues responsible for promoting sustainable development. It has adopted an exploratory approach to review secondary sources, such as previous research papers and reports specifically on eco-tourism, ethnic cultural heritage, and community development in the Dai villages of Xishuangbanna. Face-to-face and online interviews with tourism academics from China were also conducted. Empirical research conducted by both Chinese and overseas scholars, particularly in the Dai villages of Xishuangbanna, was selected as a reference to perform critical analysis. Findings revealed that local communities have received significant economic benefits from tourism development; however, their local culture and heritage values have been manipulated in the interests of capital and political needs. Indigenous authenticity has been largely influenced by the entrepreneurial interests, bureaucratic mandates, and economic necessities of the local people. As such, the prevailing model of tourism development generally favors the tourism entrepreneurs and the state with less attention to Dai ethnic people. This study suggests adopting inclusive community participation and collaborative efforts to promote sustainable ecotourism and community development in ethnic settlements around the globe especially country like Nepal. The article makes an effort to examine the case of the indigenous communities of Xishuangbanna, the Peoples' Republic of China the theoretical lens of PMPD.