Litter may indirectly affect competitive interactions. It is not clear whether these changes are additive or non-additive indirect effects. Non-additivity could result from: (1) changes in biomass allocation patterns by competitors towards organs not directly involved in resource acquisition (e.g., longer hypocotyls); (2) changes in the proportion of different functional groups (e.g., grasses and forbs) that possess different competitive abilities; or (3) through priority effects caused by subtle changes in timing of emergence. We used a combination of field and glasshouse experiments in which Eucalyptus obliqua seedlings were grown either with or without leaf litter (grass litter/eucalypt litter), and with or without competitors. Eucalypt species growing in the field and in pots attained more biomass with litter than without when competitors were absent. Competition substantially decreased the biomass of eucalypt seedlings. Competitive intensity was heavily influenced by litter type and was most intense in the presence of grass litter. Litter produced a small change in patterns of biomass allocation in the competing herbaceous vegetation, and there was a slight (marginally non-significant) indication of a change in the proportion of grasses relative to forbs when litter was present. However, when the integral of competitor biomass over time was used to calculate competitive intensity, the combined effects of the experimental factors (litter and competition) became additive, suggesting that the effect of leaf litter on the timing of germination and establishment in the grasses and forbs, relative to that of Eucalyptus seedlings, was the principal mechanism by which leaf litter altered the interaction strength of the species studied. © 2008 Springer-Verlag.