Social innovation is recognised for its potential to turn societal challenges into opportunities and develop sustainable solutions for people and nature. We identify and examine challenges that Ukrainian forestry is facing and apply an “action arena” conceptual approach to explore whether and how social innovation can enhance the sustainable development of forestry. We develop a framework to analyse the reconfiguration of social practices by using research methods that focus on the use of documentation of the institutional contexts and interviewing forest policy experts, as well as stakeholder evaluation of the challenges and ways forward for Ukrainian forestry. We apply the Q-method to identify stakeholder attitudes and examine the role of people in the reconfiguring of social practices and promoting sustainable development of the forest sector. Implications for changing the rules of the game and institutional perspectives on forestry are identified, with examples of social innovation initiatives presented. Results show that to emerge, develop, and be transformative, social innovation must have supporting institutional conditions to create new norms, rules, and social practices. Relevant stakeholders need to envision alternative futures, reshape places, and become more actively engaged in decision-making processes. We identify the key directions for changing the rules of the game and the opportunities that social innovation has to offer.