The impact of inbreeding and hybridization on fitness was compared in the two co-occurring forest tree species, Eucalyptus ovata and E. globulus, aimed at explaining the rarity of their hybrids in nature. The success of selfing, open-pollination and outcrossing of both species and interspecific hybridization was monitored from seed-set to 10-year’s growth in a field trial. There was a unilateral barrier to hybridization with seed-set obtained only with E. ovata females. The F1 hybrids exhibited reduced viability compared to intraspecific cross-types at virtually all stages of the life cycle and are clearly at a selective disadvantage compared with their open-pollinated E. ovata half-sibs with which they would directly compete in nature. Eucalyptus ovata and E. globulus overlap in their flowering time but the F1 hybrids flowered later with virtually no overlap with either species. The asynchronous flowering and reduced reproductive fitness of F1 hybrids would markedly limit the opportunity for advanced generation hybridization. Inbreeding similarly had a deleterious effect on the fitness of both species, and the F1 hybrids were most competitive with the E. ovata selfs. It is argued that changes in inbreeding levels of parental populations may be a key factor affecting the relative fitness of hybrids and their potential to impact on the pure species gene pool. Reduced fitness of the pure species through inbreeding may result in hybridization having its greatest evolutionary impact in small founder or relict populations.