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Bitou bush is a weed of national significance and has been declared as a key threatening process in NSW. We aimed to strengthen the scientific understanding of the mechanisms of invasion by investigating potential allelopathy and indirect soil chemical effects. Our study compared whether extracts of bitou bush leaves, roots and soil had a different effect on the seedling growth of a range of native species compared to comparable extracts from an acacia, the native dominant in the non-invaded system. We found that bitou bush roots released significantly higher concentrations of sesquiterpenes into the soil, compared to the acacia. Corresponding bitou bush root and soil extracts were found through lab based bioassay studies to inhibit seedling growth of four native species. Moreover, acacia seedling growth was significantly inhibited only by the bitou bush soil extracts, suggesting an indirect soil chemical effect. We also found that the acacia soil had higher concentrations of phenolic compounds than the bitou bush invaded soil. Several acacia root, leaf and soil extracts also inhibited the growth of native seedlings, although to a lesser extent than the bitou bush extracts. These results suggest that although there appeared to be allelopathic effects between co-evolved plants, the exotic bitou bush inhibited the seedling growth of all five native plant species studied, including the dominant acacia. This finding suggests that bitou bush dominance could at least partially be due to allelopathy or indirect soil effects.