Traditionally, the economy of the village was generated by small-scale agriculture, sheep herding, cork harvesting, and handicrafts, like hand-weaving lambswool cloth and furniture-making. These activities are now quite limited and under-resourced. Due to the location of Grazalema in the middle of the Sierra de Grazalema Natural Park and the fact that the town is one of the pueblos blancos, the so-called White Towns of Andalusia, tourism now plays a major role in sustaining the village and its people. The mountainous area around Grazalema is popular with climbers and hikers, and local people make money by providing accommodations and hospitality to visitors
