Biological invasions pose a significant threat to biodiversity, especially on oceanic islands. One of the primary explanations for the success of plant invaders is direct suppression of competitors. However, indirect interactions can also be important, although they are often overlooked in studies on biological invasion. The shrub Leucaena leucocephala is a widespread island invader with putative allelopathic effects on the germination and growth of other species. We quantified the impact of Leucaena on plant communities richness on an oceanic Brazilian island and, through nursery experiments, investigated the potential for allelopathic effects on the germination of Erythrina velutina, a native species that is often absent from stands of Leucaena. Additionally, in a manipulative field experiment, we examined the direct and indirect effects (mediated by the native species Capparis flexuosa) of the invader on the development of Erythrina. The species richness in invaded sites was lower than in uninvaded sites, and Capparis was the only native species that was frequently present in invaded sites. In the nursery experiments, we found no evidence that Leucaena affects the germination of Erythrina. In the field experiments, the odds of Erythrina germination were lower in the presence of Leucaena litter, but higher in the presence of Leucaena trees. However, the survival and growth of Erythrina were considerably inhibited by the presence of Leucaena trees. The isolated effect of native Capparis on the germination and growth of Erythrina varied from positive to neutral. However, when Capparis and Leucaena were both present, their combined negative effects on Erythrina were worse than the effect of Leucaena alone, which may be attributed to indirect effects. This study provides the first empirical evidence that the balance of the interactions between native species can shift from neutral/positive to negative in the presence of an exotic species.