The quantitative role of the canopy size of nurse shrubs on microenvironment and native tree establishment in degraded tropical lands has been seldom studied. In a 21-month field experiment, we aimed to test the effect of a native shrub with different canopy sizes on the early establishment of native trees as part of the effort of forest restoration in tropical China. We examined the microenvironment, and the seedling establishment and growth of two native trees: Castanopsis fissa and Syzygium hancei in both open space (OS) microsite and microsite under the canopy of the native pioneer shrub Rhodomyrtus tomentosa. Shrub microsite was further divided into large canopy (LC), and medium canopy (MC) microsite, based on the shrub leaf area indices. Results showed that relative to OS, LC had higher soil nutrient concentration and water content, and lower photosynthetic active radiation (PAR), while MC had lower PAR and higher soil exchangeable Mg, K, and Ca. Survival and growth were mostly enhanced, while water stress and photoinhibition reduced for C. fissa seedlings in MC and S. hancei seedlings in LC. It is found that the beneficial effects of the native shrub on seedling establishment and growth result mostly from the improvement in nutrient and water availabilities, the reduction in plant stress caused by harsh summer light, and the specific ecological requirements of different tree species. We suggest that different canopy sizes of native shrub R. tomentosa may be explored to target different native trees and hence promote forest restoration in degraded tropical ecosystems.