Forests are the major components of terrestrial ecosystems, and degradation of forests has become a major environmental problem worldwide. Accurate evaluation of degraded forest ecosystems is the primary prerequisite for forest restoration and reconstruction. Recently, establishment of a rational evaluation index system for degraded forest ecosystems has received much attention. On the basis of numerous studies on degraded forest ecosystems, we reviewed the definition, characteristics, and general processes of forest degradation in this paper. We also summarized the general principles of indicator selection and main methods for establishing the evaluation index system. In addition, we analyzed and compared several types of indicators suggested by previous researchers. On this basis, we re-screened and established an evaluation index system for the assessment of degraded forest ecosystems. We selected 32 key evaluation indicators based on the composition, function, and habitat aspects of the ecosystem, that could synthetically reflect the degraded forest ecosystem. This may provide references for the establishment of an evaluation index system for degraded forest ecosystems at regional and national scales and a scientific basis for the restoration and reconstruction of degraded forest ecosystems in China. Moreover, some limitations during the establishment of the evaluation index system for degraded forest ecosystems were discussed, and the main issues were suggested to improve the scientific accuracy and rationality of the evaluation index system.