Summary 1Determining the mechanisms by which invasive species exclude natives is critical for conserving and restoring native populations in impacted habitats. In recent decades the grass Phragmites australis has been aggressively invading coastal marshes of North America, with monocultures often replacing diverse assemblages of plants. 2 Our objective was to quantify how P. australis modifies the abiotic (soil and light conditions) and biotic (litter and shoots) environment and to determine the mechanisms by which it excludes two common forbs, the annual chenopod Atriplex patula var. hastata and the perennial aster Solidago sempervirens , from the highest tidal elevations of a brackish marsh in southern New England, USA. 3 In a 3-year field experiment we added seeds of both forb species to stands of P. australis , where we manipulated shoots and litter in an orthogonal design, and to uninvaded marsh areas dominated by the rush Juncus gerardi , where we manipulated the shoots of the marsh vegetation. In general, seedling establishment and the number of plants surviving until the end of the growing season were substantially greater in areas not invaded by P. australis , and both shoots and litter limited the abundance of forbs within stands. 4 Forbs surviving within stands of P. australis grew larger and produced more seeds than those in uninvaded areas, indicating that changes to the soil resulting from invasion do not preclude the survival of established forbs. This was confirmed by a glasshouse study where the performance of forbs in soil collected from within stands of P. australis was better than in soil from areas dominated by J. gerardi . 5 Similar to many invasive grasses in terrestrial communities, P . australis excludes native forbs through competition, modifying the biotic environment of the marsh at both the ground (litter) and above-ground (shoots) levels. Our results suggest that successful invaders, such as P. australis , are likely to be the ones that can engineer habitats in multiple ways and limit populations of native species across several critical stages of their life history.