On the northern road heading west from Ao Yai (the long beach) to the school in the middle of the island, there are a number of restaurants with signs saying "vegetarian," but most of them serve lots of meat (the signs are simply advertising that they *also* serve veg options). There are two exceptions: Cha Chai Home and Baan Namchaa (reviewed separately), both of which (as of Jan 2013) are almost entirely ovo-lacto-veg except for one animal item. In the case of Cha Chai Home, that item is oyster sauce, which is included in some of the dishes but can be left out or substituted for soya sauce on request.
Cha Chai Home is the child of a very friendly Euro-Asian couple, and their extensive menu showcases this international flavor with Thai and Western dishes, including a number of faux "meat" items (we had the ginger "fish," which was particularly good). The menu does not explicitly indicate which items are vegan, but let the helpful owners know if you're vegan and they'll take care of you. Not all of their dishes can be veganized, but a good many can.
All food is made fresh to order, which can take some time when there are many patrons, so it's advisable to come a little early if you can.
Cha Chai Home is located on the northern road to Ao Yai, roughly in the middle of Koh Phayam, west of the school and east of the "Middle Village."
They close at 7pm, but if you're an early bird there are good dinner options on offer.
Enjoy!Pros: Very friendly, Huge menu, Quite a few vegan options
Cons: Not completely veg (but almost)