1. Integrating biodiversity conservation and the development of local communities is a major challenge for biosphere reserves. Their zonation (core, buffer and transition) is intended to promote biodiversity conservation and sustainable development, although only the core zone is legally constituted to conserve biological diversity. Inevitably, and especially in developing countries, the management of biosphere reserves has to reconcile trade-offs between conservation and development, and address the pressures placed by local communities on the biodiversity resources of the reserve. 2. We studied the effects of development in the three zones of Yancheng Biosphere Reserve (eastern China) on the endangered red-crowned crane Grus japonensis, the waterbird communities and the economic benefits to local communities. We tested the hypothesis that allowing different developments within each zone can reduce conflict between biodiversity conservation and community development. 3. The number of cranes in the reserve increased from 361 to approximately 1100 between 1982 and 1999, but declined markedly to 612 in 2003. The cranes also became increasingly concentrated in the core zone and switched to feeding predominantly in artificial habitats. The proportion of cranes in the core, buffer and transition zones was largely associated with the proportion of developed land area and the total number of cranes in the reserve as a whole. 4. Developments in the transition zone have reduced and degraded the wetlands, and have disadvantaged cranes and waterbirds. In contrast, the transformation of natural wetlands into artificial ones in the core zone has, to date, continued to support cranes and waterbirds. This has brought economic benefits to the reserve and local communities, but at the cost of the integrity of the wetland ecosystem as a whole. 5. Synthesis and applications. Despite an increase in the number of red-crowned cranes in Yancheng Biosphere Reserve, their range has collapsed into the core of the reserve where there is now a substantial artificial wetland complex. Allowing development in all three zones, together with a lack of resources for conservation, appears to have contributed to the reserve becoming overdeveloped. The loss of ecosystem integrity across the reserve as a whole highlights the need for an ecosystem-based approach to future management combined with the restoration of natural wetlands.