The Malaysian state of Sarawak on the island of Borneo is one of the global hotspots of deforestation and forest degradation. The planting of oil palm has played a key role in the transformation of land use in the state. While much of the expansion in Sarawak so far has taken place in state forests (80%), many new plantations are being established on native customary rights (NCR) land. A significant portion of the total land area in Sarawak (20–25%) is claimed as native customary land where villagers traditionally practise extensive, semi‐subsistence farming. This article explores how major resource development projects intersect with and accentuate internal community differences in sites of new plantations. We do so by examining the case of an Iban village where the introduction of a large‐scale oil palm scheme has resulted in conflict and division within the community. By analysing the narratives that suggest that large‐scale land development projects ‘bring development to the people’, utilising ‘idle lands’ and ‘creating employment’ to lift them out of poverty, we argue that political and economic processes related to cultivation of oil palm intersect with local community differences in two ways. First, these projects cement and enhance internal power structures and inequalities. Second, the government's development narratives influence communities and link local community relations with national political discourses in complex ways.