REDD+1 is an economic mechanism aimed at incentivizing the reduction or offsetting of carbon emissions in forests, while also realizing multiple benefits alongside climate action. Engaging local stakeholders is crucial for its sustainable implementation and benefit-sharing. This study focuses on the knowledge and understanding of local-level stakeholders about REDD+ and its associated attributes, revealing significant knowledge gaps between areas with and without REDD+ pilot activities. We conducted interviews using semi-structured questionnaires (n = 136), key informant interviews (n = 27), and focus group discussions (n = 4) with local-level REDD+ stakeholders (LLRS) comprising both those inside and outside of pilot project districts in three provinces, each representing one district by taking a case of lowlands of Nepal adopting the concept of socio-ecological systems (SES). Data were analyzed using a generalized linear model (GLM) and visualized through Sankey diagrams. The results indicate a poor understanding (29%) of LLRS on the REDD+ process, its relationship with forests, concerns among stakeholders, and its potential significance. The perception of REDD+ knowledge, mechanisms, and benefits significantly (p < 0.05) varied across study areas, age groups, genders, professional backgrounds, educational levels, ownership of private forests, and types of household energy sources among respondents. Despite receiving readiness funds, stakeholders’ comprehension of the REDD+ process remains limited, indicating suboptimal policy implementation. Knowledge gaps were influenced by social background, voices and choices, and the fear of REDD+ disrupting traditional practices among the LLRS. The study emphasizes the need to redress the concerns of LLRS by considering their social backgrounds and traditional practices through informed and participatory decision-making, and to enhance communication, transparency, and inclusive forest governance process. The findings suggest that current external support has not sufficiently enhanced capacity among LLRS, suggesting the need for sufficient and sustainable support through national policy and financing mechanisms. Further, the study identified extremely poor REDD+-related knowledge dissemination within communities, exacerbating challenges in smooth implementation and benefit-sharing mechanisms, revealing the simplification of its process is essential. The study advocates for revising REDD+-related policies to optimize benefits, ensure smooth implementation, realize fair and equitable carbon credits from forests, and foster shared responsibility and ownership among all stakeholders in climate actions through improved forest governance.