Abstract Exotic grasses are becoming increasingly abundant in Neotropical savannas, with Melinis minutiflora Beauv. being particularly invasive. To better understand the consequences for the native flora, we performed a field study to test the effect of this species on the establishment, survival and growth of seedlings of seven tree species native to the savannas and forests of the Cerrado region of Brazil. Seeds of the tree species were sown in 40 study plots, of which 20 were sites dominated by M. minutiflora, and 20 were dominated by native grasses. The exotic grass had no discernable effect on initial seedling emergence, as defined by the number of seedlings present at the end of the first growing season. Subsequent seedling survival in plots dominated by M. minutiflora was less than half that of plots dominated by native species. Consequently, at the end of the third growing season, invaded plots had only 44% as many seedlings as plots with native grasses. Above-ground grass biomass of invaded plots was more than twice that of uninvaded plots, while seedling survival was negatively correlated with grass biomass, suggesting that competition for light may explain the low seedling survival where M. minutiflora is dominant. Soils of invaded plots had higher mean Ca, Mg and Zn, but these variables did not account for the higher grass biomass or the lower seedling survival in invaded plots. The results indicate that this exotic grass is having substantial effects on the dynamics of the tree community, with likely consequences for ecosystem structure and function.