Abstract The Indonesian Timber Legality Verification System (SVLK) has been developed primarily to address illegal logging in Indonesia, and is licensed under the European Union's Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan. While SVLK was catalysed by concerns about the legality of wood originating from natural forests, it applies to all wood production in Indonesia, including smallholders harvesting planted trees. This study investigates SVLK implementation in value chains originating from smallholder forests planted on private land in East Java Province, where these forests are important assets for both farmers and the forest industries. It follows value chains for two manufactured wood products, blockboard and plywood. There are specific SVLK requirements for each value chain actor, other than the market brokers in these chains. Results reveal the limitations of SVLK architecture in relation to smallholder value chains, variation in compliance practices, and points of ‘illegalisation’ and legalization within the value chains. The blockboard and plywood products from each case study chain claimed SVLK compliance. However, only one of the two case study chains for each product was compliant up to the blockboard or plywood manufacturing stage; and no distinction was made at this stage between SVLK-compliant and non-compliant wood. Consequently, none of the final products from any case study chain are SVLK-compliant. These results illustrate the challenges of designing and implementing timber legality systems for smallholder value chains, and suggest areas of focus to improve SVLK for smallholder value chains.