The “Sea People”, a marginalized ethnic minority who traditionally inhabited the coastal area and outer islands located in the Andaman Sea on the west of Southern Thailand, face enormous challenges brought about by the national development focusing on promotion of tourism and the establishment of a protected area for marine conservation. This has led to a radical change in which their livelihoods can no longer be dependent on the sea in the old way of ecological adaptation. As a result, they are forced to depend more on the coastal world of high social and economic complexity. This raises an important issue regarding the loss and continuity of their indigenous knowledge, as the inhabitants are forced to live in an ecologically different setting. The Urak Lawoi group of Phuket in Southern Thailand was chosen as a case study with the use of an in-depth inquiring method under the rubric of qualitative research. It is found that the Urak Lawoi dependence on the coastal sea has been restricted by the conservation policy in favor of tourism. The Young and middle-aged population have to seek employment on land modernized by tourist industry. Although they appear to be well adapted to the new economic and social opportunities, the study finds an erosion of indigenous knowledge, resulting in the weakening of ethnic identity and community consciousness. It is recommended that promoting a “dual culture” should be an alternative strategy for community development of these Urak Lawoi and some other Thai ethnic minorities. On one hand, an integration of the modern tourism-based economy is welcomed as a viable alternative, and on the other, ethnic and community roots should be revived. This could be done through incorporating indigenous people and their knowledge into tourist schemes and employing them as guides. Building a community-based museum highlighting their traditional ecological knowledge is highly recommended. This would change urban-biased attitude and add value to tourism.