We examined allelopathic effects and underlying mechanisms of Cinnamomum migao on its associated species Liquidambar formosana. We assessed effects of aqueous extracts of C. migao pericarp, leaf, and rhizosphere soil at different concentrations on seed germination, seedling growth, and physiology of L. formosana. All extracts inhibited L. formosana seed germination, with obvious inhibition at high concentrations (50 mg mL−1). All extracts promoted the height and ground diameter of seedlings, with the highest promotion achieved with aqueous leaf extract at a concentration of 1 mg mL−1 and aqueous pericarp and rhizosphere soil extracts at a concentration of 5 mg mL−1. All extracts promoted soluble protein accumulation in L. formosana seedlings, with the highest accumulation achieved with aqueous pericarp extracts. Aqueous leaf extract promoted soluble starch accumulation. Aqueous pericarp extract at concentrations of >10 mg mL−1 significantly increased soluble sugar content. Aqueous leaf and rhizosphere soil extracts at concentrations of >5 mg mL−1 increased proline accumulation. All extracts at concentrations of >1 mg mL−1 significantly increased malondialdehyde content. Aqueous pericarp and rhizosphere soil extracts at concentrations of 10 and 0.5 mg mL−1, respectively, promoted superoxide dismutase activity. Activities of soil urease, polyphenol oxidase, and catalase were significantly increased when the concentration of aqueous pericarp and leaf extracts exceeded 5 mg mL−1, and the activity of soil acid phosphatase significantly increased when the concentration of all extracts were 5 mg mL−1. According to the synthetic allelopathic index, the low- and medium-concentration extracts all showed a promoting effect, whereas high concentrations exhibited obvious inhibitory effects; furthermore, the comprehensive effect value of leaf water extraction was higher than that of the pericarp and rhizosphere soil. Thus, allelopathy can affect the long-term co-existence of C. migao and L. formosana.