The coexistence of traditional knowledge and environmental preservation presents a critical nexus in advancing sustainable development efforts, particularly concerning the conservation of indigenous medicinal plants. These plants play a dual role: they are essential components of traditional healing practices and are integral to economic stability, food security, and nutrition in communities worldwide. However, the rapid depletion of biodiversity and ecosystem degradation threaten the availability and sustainability of these vital resources. Despite their cultural and economic importance, there is a noticeable gap in the research addressing the conservation and sustainable use of indigenous medicinal plants, particularly focusing on the preservation of traditional knowledge systems. The existing literature often lacks comprehensive studies that document traditional knowledge practices related to medicinal plant conservation. Additionally, there is limited understanding of how the mismanagement of medicinal plant resources impacts the livelihoods of rural smallholder farmers who heavily rely on these plants for economic gains and food security. Hence, this study sought to explore and investigate the harmonious strategies that integrate traditional knowledge systems with modern conservation practices to safeguard indigenous medicinal plants on economic well-being in the Amatole District Municipality of the Eastern Cape. The study was conducted in 2023, and a structured questionnaire was used to capture the realities and experiences of prominent stakeholders (smallholder medicinal plant farmers). A multi-stratified sampling technique was used to draw up an appropriate sample of 150 smallholder farmers. Descriptive statistics and propensity-score matching were used for analysis. The study results indicated that the women farmers who are 44 years of average age and have 10 years of average schooling duration participate more in the production of indigenous medicinal plants. The average farm size per household is 1 ha, and it is reliant on an average of five members per household. The participation of women with indigenous medicinal plants underscores the significant role of women in traditional knowledge systems and sustainable agricultural practices, contributing to household income and community resilience. Additionally, the findings indicated that smallholder farmers are only aware of keeping indigenous medicinal plants by producing them in protected areas and on-farm conservation; other measures appear challenging to them. The study results reveal that knowledge of seed propagation, lack of knowledge of the implications of endangerment, the removal of forests with the motive of building houses, and, lastly, financial support were the constraints faced by smallholder farmers. Empirical results on the conservation and sustainable use of indigenous medicinal plants revealed that farmers are generating income to sustain the household as well as enhancing food and nutrition security. Based on the study results, it is recommended that government entities and policymakers are urged to prioritize supporting traditional knowledge, implement on-farm conservation, and foster sustainable agricultural practices to ensure biodiversity conservation, cultural preservation, and sustainable livelihoods. Enhancing targeted support for smallholder farmers, including access to land, agricultural services, and financial aid, alongside market development, ensures equitable benefits and sustainable livelihoods. Educational campaigns should raise awareness about indigenous medicinal plants’ ecological and economic importance, integrating traditional knowledge into formal education.