In California the annual vegetation adjacent to natural- ized stands of Eucalyptus camaldulensis often is inhibited severely. Annual herbs rarely survive to maturity where Eucalyptus litter accu- mulates. In the ecotone between the trees and herbs a "bare zone," lacking both litter and significant herbaceous vegetation, often is encoun- tered. The occasional herb occurring in this zone is stunted less severely than those in the litter. Grassland of gradually increasing vigor begins at the edge of the bare zone. This pattern was not explained by differences in edaphic conditions, differential grazing, seed removal, or competition for light or nutrients. Competition for water was significant in the production of bare zones, but was not responsible for the lack of herbs in the litter zone. Here soil moisture levels were usually comparable to those in the grassland. Several volatile and water-soluble toxins were found in Eucalyptus tissues. Cineole and a-pinene, both highly toxic terpenes, were found adsorbed to colloidal soil particles of the litter and bare zones. Adsorbed terpenes were toxic to germinating seeds and seedlings. Water-soluble toxins found in the litter inhibited herb growth in laboratory, green- house, and field experiments. Of 10 isolated phenolic toxins, five were identified as caffeic acid, chlorogenic acid, p-coumaric acid, ferulic acid,