There is a need to assess climate change mitigation opportunities in forest sector in India in the context of methodological issues such as additionality, permanence, leakage, measurement and baseline development in formulating forestry mitigation projects. A case study of forestry mitigation project in semi-arid community grazing lands and farmlands in Kolar district of Karnataka, was undertaken with regard to baseline and project scenariodevelopment, estimation of carbon stock change in the project, leakage estimation and assessment of cost-effectiveness of mitigation projects. Further, the transaction costs to develop project, and environmental and socio-economic impact of mitigation project was assessed.The study shows the feasibility of establishing baselines and project C-stock changes. Since the area has low or insignificant biomass, leakage is not an issue. The overall mitigation potential in Kolar for a total area of 14,000 ha under various mitigation options is 278,380 tC at a rate of 20 tC/ha for the period 2005-2035, which is approximately 0.67 tC/ha/yr inclusive of harvest regimes under short rotation and long rotation mitigation options. The transaction cost for baseline establishment is less than a rupee/tC and for project scenario development is about Rs. 1.5-3.75/tC. The project enhances biodiversity and the socio-economic impact is also significant.