One of the major challenges of tourism development in rural areas is project generation. Tourism supply in rural areas is typically characterised by small and micro enterprises specialised for niche markets, the lack of the classic "sun, sea, sand" tourist products, adequate supporting infrastructure, financial sources and the resulting struggle for product diversification. Furthermore, despite being a negotiated process, a recurrent issue of rural tourism is stakeholder involvement and insufficient collaborative capacity. Within this context, this paper explores how projects are generated by community involvement through the case of the European Union LEADER Local Action Groups (LAG) for rural tourism development. In order to identify the obstacles and managerial practices of project generation, a qualitative approach was used. The results provided evidence on the failure of the standardised public measures to reflect the diverse development needs of rural areas and highlighted how these measures hinder local entrepreneurial activity. However, public intervention is required to safeguard the sovereign action and thus the successful operation of the LAGs, as financial instability holds the risk of becoming subject to lobby activity.