Most woody plants contain a diverse array of plant secondary metabolites (PSMs) that deter vertebrate herbivores. However, mammalian folivores have evolved a complex of physiological and behavioural strategies to counter these compounds, leading to the development of an ''evolutionary arms race''. Marsupial folivores are ideal models to investigate the role of PSMs in the interaction between the external foraging environment and the digestive physiology of mammalian herbivores, as we have a very strong understanding of the diversity and modes of action of PSMs in Eucalyptus, as well as the mechanisms by which animals overcome the effects of these compounds. Studies of marsupial folivores have benefited from the facts that: these herbivores subsist on relatively poor quality diets; they include feeding types from specialist species such as the koala, to generalists; and life history factors such as maternal investment in reproduction can be measured more easily than in eutherians. Here, we describe patterns of spatial variation in the types and distributions of plant secondary metabolites in Australian forests and discuss how this variation influences foraging behaviour, habitat selection and life history strategies in arboreal, folivorous marsupials. We also provide a summary of our understanding of the mechanisms by which marsupials detect and regulate their intake of toxic compounds. While our examples are drawn largely from studies of the interaction between marsupials and Eucalyptus, this knowledge is applicable to advancing our understanding of interactions in plant-mammal systems more broadly. We also identify and discuss key areas that should be the focus of future research.