The development of tourism villages is one of the efforts to improve the welfare of local rural communities. This paper aims to reveal the development model of tourism villages to improve the welfare of rural communities. The research method used is a qualitative research method in which data obtained through interviews with selected resource persons is then analyzed through the stages of data collection, data reduction, data presentation, and conclusions. This paper presents the research results in the form of two models, namely the model of the formation of Desa Wisata Pancoh, and the model of the influence of the development of Desa Wisata Pancoh on welfare. The first model presents the process of forming Desa Wisata Pancoh against the background of the eruption of Mount Merapi which resulted in village damage and then redevelopment of rural conditions was carried out until finally it was decided together to make Pancoh Village a tourist village. The second model suggests that the development of Desa Wisata Pancoh has succeeded in improving the welfare of the local community through a process of social, economic, and physical change that can empower the community.