There have been mornings when Jim Stone has woken up to the sight of wolves within 100 yards of his front door. And there have been afternoons, many of them, when the wolves have prowled along the thin electrified cable that delineates the southern boundaries of his cattle ranch, just watching and waiting.

Stone says he can live with that: "They are a part of the chain of life. They were here before we came so it probably makes sense that they are here [now]."

It is not the reaction one might expect from a man whose livelihood depends on keeping the wolves away. There are 200 head of cattle on Stone's 2,500-acre ranch of gold-tinged grassland that rolls out from the high peaks, across a narrow strip of road, and back down behind his barn to the Blackfoot river below.

Nor is it a typical reaction in Montana, where the governor has been pressing the Obama administration to end federal protection for a rapidly expanding wolf population, part of an intense backlash against government wildlife protections not just in Montana, but in Idaho and Wyoming too. Locals say that the wolves are threatening elk and other wildlife, and harassing their cattle, and they want to declare open season on the predators.

But Stone and other landowners involved in the Blackfoot Challenge, a conservation alliance of ranchers, environmentalists and government officials, want to make up for the first white settlers, who drove the animals almost to extinction, by finding a way to live with wolves. For wolves, as for humans, this is a second chance. Decades after their near-annihilation, wolf populations are on the rebound in the Rocky Mountain west.

"When ranchers and miners first came into the area we were kings. If we wanted to get rid of wolves, we did," Stone says. But, he adds: "This isn't the 1880s any more. We have to figure out a way of co-existence."

Stone had never seen a wolf in the wild when he took over the ranch from his father in 1985. He spotted his first about 10 years ago. These days, he sees a few each month. To his way of thinking, the wolves, though returning to the same geographical locations they roamed before the arrival of white settlers, are the newcomers now. The intervening years have altered the Montana landscape. What was once untamed wilderness is now ranchland. Some of it is even being given over to creeping urbanisation. Wolves and humans are going to have to learn how to survive together.

"It's an interesting dynamic. They have been gone for so long and they come back and the world has completely changed. We have changed," he says. "It is a totally different game now."

The first white settlers to arrive in the west imagined a landscape that was predator-free. The new arrivals in the late 19th and early 20th centuries shot, poisoned and trapped wolves at will – an extermination effort encouraged by the federal government, which was interested in promoting livestock interests. In the 1920s, the last wolf was reported shot in the area around Yellowstone National Park.

But by the 70s, the federal government had extended protection to the last wolf populations still remaining, and made it illegal to kill wolves. In the mid-90s, federal wildlife officials imported a pair of wolves from Canada to the Rockies, and embarked on a project to restore the population.

Fifteen years later and wildlife officials estimate there are now about 1,700 wolves in Montana, Idaho, Wyoming, Oregon and Washington. That is five times more than envisaged under the original recovery plan. Montana alone is believed to have about 500 wolves.

"We have had fairly rapid growth in the wolf population since they were re-introduced in the 1990s," says Seth Wilson, the wildlife co-ordinator for the Blackfoot Challenge. "The big challenge is can we co-exist? Can we live with large carnivores? That is the next chapter that we are writing."

As far as Stone's small patch of Montana in the Blackfoot Valley is concerned, that breaks down into five active packs, each made up of five or six wolves.

In practical terms, it has meant additional expenses for guarding his herd in the high summer pastures and closer to home. His farm equipment roster now includes a roll-out fence: a two-mile coil of electrified cable fitted with bright red strips of plastic. The sight of the streamers on the fence, called a Fladry line, stops the wolves in their tracks. "We have had them stop and just sit on the side," says Stone. But then the wolves grow accustomed to the streamers, forcing Stone to roll up the line and start all over again.

This summer, for the second year, Stone and his neighbours also clubbed together to hire a range rider to keep an eye on their cattle as they moved into remote areas. Peter Brown spent his days traversing the pastures by truck, motorcyle, on horseback and on foot. At times, his only solid leads came from ranchers flagging him down in the road to pass on news of a wolf sighting.

He was equipped with rubber bullets and an array of noise makers. But Brown discovered the biggest deterrent was simply his presence. "When I am close to them, they move off. All I know is they can smell me, see me, hear me, they just know I am in the general area and that human presence seems to be the factor that pushes them off in a lot of cases," he says.

The ranchers are testing out other methods of wolf avoidance. Stone makes a habit of bringing young calves into the barn, and making checks on his cattle when they are out to summer pasture daily, instead of once a week.

Like other ranchers, he now buries dead animals instead of leaving them in the fields as carrion. A recent study in Oregon showed that wolf packs were drawn to bone piles where ranchers dump dead cattle.

He has heard about ranchers in other states resorting to sound systems that set off a large siren when triggered by a signal from a wolf wearing a radio collar, loudspeakers blaring out the sound of gunshots, propane torches, and even helicopters. It's not for him. "The whole 'big bang' theory doesn't do too much for me. It's more of a pain to live with than it's worth," he says. "I'd rather try something that is a little more friendly."

Nor is he keen on the idea of a biological fence, where property owners sprinkle wolf urine or scat around their property with the idea it will scare off new arrivals.

Wildlife officials say the problem is that none of the known methods for wildlife control are entirely effective, or even practical.

By the time the summer grazing season had ended, the ranchers in the Blackfoot Challenge had between them lost four cattle to wolves. Eight wolves also died. Stone was lucky. None of his cattle were killed by wolves.

"There is no silver bullet. None of these things have really decreased depredations a lot. We still have depredations," says Liz Bradley, a wolf specialist with the Montana Fish Wildlife and Parks.

A recent study suggests that ranches which have lost cattle to wolves are 50 times as likely to suffer a repeat attack.

Those losses – though still low – carry powerful implications in Montana, where there is rising anger at the federal government for returning wolves to the endangered species list in late October in response to a lawsuit from an environmental organisation.

Both Montana and Idaho allowed wolf hunting last year, after the federal government briefly lifted protection for wolves. Wyoming wants to free its residents to shoot wolves on sight. The state's senators are now pushing for a bill that would allow limited hunting of wolves. The move has alarmed some conservationists who fear hunters or ranchers may soon take the law into their hands – defying the heavy penalties for illegal killing of the animals. Two wolves were shot dead in two separate incidents in a national park area in November.

"With the levels of emotion, and some of the statements coming out of the anti-wolf people, its pretty obvious there is going to be a lot of poaching going on," says Bob Clark of the Montana Sierra Club.

Even Stone is not entirely happy about the hunting ban. "We need to be able to have all the tools in our toolbox to manage wolves," he says. "It may end up being hunting, or it may be a whole load of things that we haven't tried yet, but we have to have a whole array of tools or else there will just be complete conflict."

He would like to think there are other methods of controlling wolves. Maybe find them a food source elsewhere? Maybe encourage them to adapt to a new existence in a rapidly disappearing wilderness?

"The bottom line is they are going to have to adapt to all of us. That is the unfortunate part of all of this." He admits he doesn't have the answers yet, but there is one thing Stone does know: "It ain't my father's ranch any more."

Wolves around the world: How packs are faring

• Wolves once roamed the northern hemisphere, living in areas as diverse as Israel and Greenland, before they were ruthlessly exterminated through the use of firearms, poison and traps. Now they are on their way back in parts of Europe and North America, thanks to restoration projects underway since the 1990s.

• The population boom – from the Great Lakes region of the American midwest to Spain – has led to calls to reintroduce wolves to Scotland. But in Europe, as in America, expanding wolf populations have brought new areas of conflict.

• Spain's population of wolves has grown fivefold – to about 2,500 – since their near annihilation in the 1970s and they now account for about a third of all European wolves outside the former Soviet Union. In Italy, after the wolves were wiped out throughout the Alps and Sicily, recovery efforts have seen a population of about 500 in the wilderness areas of the Abruzzo mountains east of Rome. Poland, which had the last surviving robust population in central Europe, now has about 750 wolves.

• In Scandinavia, wolf numbers are smaller – about 200 for Sweden, and less than two dozen in Norway. But both countries have sanctioned wolf hunts as a method of maintaining strict population control, despite criticism from the EU commission and conservationists. Biologists fear hunting such small populations risks destroying wolf packs' breeding patterns, further reducing the gene pool, and diminishing the future viability of the animals.

• In America, in addition to those in the Rockies, there are about 3,000 wolves around the wilderness areas of northern Minnesota and 1,200 in Wisconsin and Michigan. But, as in the west, a backlash is brewing. Locals say the wolves are a danger to their pets, and a number of lawsuits are before the courts seeking to end federal government protection for the animals. There is also growing evidence of vigilante action. A large number of wolves were shot illegally during the last deer hunting season in the Great Lakes area.