The rapidly growing car industry in China has led to an equally rapid expansion of monoculture rubber in many regions of South East Asia. Xishuangbanna, the second largest rubber planting area in China, located in the Indo-Burma biodiversity hotspot, supplies about 37% of the domestic natural rubber production. There, high income possibilities from rubber drive a dramatic expansion of monoculture plantations which poses a threat to natural forests. For the first time we mapped rubber plantations in and outside protected areas and their net present value for the years 1988, 2002 (Landsat, 30 m resolution) and 2010 (RapidEye, 5 m resolution). The purpose of our study was to better understand the pattern and dynamics of the expansion of rubber plantations in Xishuangbanna, as well as its economic prospects and conservation impacts. We found that 1) the area of rubber plantations was 4.5% of the total area of Xishuangbanna in 1988, 9.9% in 2002, and 22.2% in 2010; 2) rubber monoculture expanded to higher elevations and onto steeper slopes between 1988 and 2010; 3) the proportion of rubber plantations with medium economic potential dropped from 57% between 1988 and 2002 to 47% in 2010, while the proportion of plantations with lower economic potential had increased from 30% to 40%; and 4) nearly 10% of the total area of nature reserves within Xishuangbanna has been converted to rubber monoculture by 2010. On the basis of our findings, we conclude that the rapid expansion of rubber plantations into higher elevations, steeper terrain, and into nature reserves (where most of the remaining forests of Xishuangbanna are located) poses a serious threat to biodiversity and environmental services while not producing the expected economic returns. Therefore, it is essential that local governments develop long-term land use strategies for balancing economic benefits with environmental sustainability, as well as for assisting farmers with the selection of land suitable for rubber production.