This study examines the integration of local arts and traditions in the development of cultural entrepreneurship through the Banyuwangi Ethno Carnival (BEC), a cultural event held in Banyuwangi, one of the regions in Indonesia known for its rich Osing heritage. This study uses a qualitative case study method; six informants were interviewed, including cultural officials, local entrepreneurs, and artists. Data were analyzed using the Gioia methodology and framed by Schumpeter's Creative Destruction Theory. Findings show that BEC effectively transforms traditional cultural elements into economic opportunities while involving the local community. However, concerns about authenticity loss and unequal economic impact persist. This research contributes to the discourse on culture-based development and offers recommendations for inclusive and sustainable festival management.