Despite extensive research focused on increasing the sustainability and productivity of agricultural systems in the tropics, adoption rates of improved management solutions often remain low among smallholder farmers. To address this, we evaluated how local knowledge and perceptions influenced decision-making processes among smallholder cocoa farmers. We conducted individual semistructured interviews with 72 cocoa farmers in Southeast Sulawesi and documented local knowledge about soil fertility indicators, nutrient cycling processes, and the interactions among shade trees, cocoa trees, and soils in cocoa agroforests. We further collected data regarding farmers’ fertilizer preferences, additional income sources, and perceived barriers to improved cocoa production. We found that farmers’ understanding of biophysical interactions in Southeast Sulawesi was comprehensive, mostly accurately aligned with scientific literature, and sometimes provided additional complementary knowledge. Cocoa farmers in Southeast Sulawesi approached decision making in a holistic way, integrating personal observations, information from external sources, and socioeconomic limitations and priorities. This finding highlights the value of flexible conservation farming approaches that allow farmers to minimize trade-offs and prioritize their households’ needs. Finally, we identify a “dual” knowledge gap on the part of farmers and scientists regarding the direct benefits of shade tree inclusion for improved yields and income security. Addressing this through further research and targeted knowledge dissemination could contribute to an increase in the long-term adoption rates of more sustainable cocoa cultivation practices.