African olive (Olea europaea ssp. cuspidata) is a small evergreen tree which has become highly invasive at a landscape scale in the western Sydney and Hunter Valley regions of New South Wales, Australia. African olive invasion results in the formation of a dense and permanent mid-canopy in grassy woodland vegetation. We investigated the relationship between African olive and native species establishment, abundance and diversity, using field surveys and a manipulative shading experiment. There were 78% fewer native species beneath African olive canopy in the field compared to uninvaded woodland sites. The shading experiment showed that simulated dense African olive shade levels produced the lowest dry weight for the three native species studied, with simulated canopy edge light providing optimal conditions for the native shrub Bursaria spinosa and African olive. Dense African olive shade levels produced the highest mortality rate for native species; however, African olive was able to maintain an 88% survival rate under dense canopy shade. This study confirms the adaptability of African olive and its capacity to decrease native plant diversity and substantially modify native vegetation at the community level.