This paper aims to investigate the complex nature of participation, collaboration and conflict between craftspeople and museum professionals in the context of museums engaging with craftsmanship. Multiple research methods (direct observation, semi-structured interviews, and documentation) were employed, focusing on the case of the Arts and Crafts Museum Cluster (ACMC) in Hangzhou, China. The findings suggest that the initial participation and continuing collaboration of the craftspeople was motivated by their receiving a sustainable income, spiritual satisfaction, and social awareness and recognition. The museum professionals were rather more market-oriented, seeking to satisfy visitors’ needs and interests. The different interests of the two parties in terms of participation and collaboration resulted in several conflicts, which were resolved by a combination of negotiation and compromise between the craftspeople and the museum professionals. Through re-examining the community participation approach in the intangible heritage practice of contemporary Chinese museums, this research highlights the importance of active participation and collaboration between the two parties through the continuing process of negotiation and compromise.