Allelopathy has been suggested as a mechanism promoting the monoculture formation of some invasive exotic plants. Previous studies have shown that hydrophobic extracts of the roots and soil of exotic bitou bush (Chrysanthemoides monilifera spp. rotundata (DC.) T. Norl.) inhibited the seedling growth of five Australian native plants, including the dominant acacia (Acacia longifolia var. sophorae (Labill.) F. Muell.). Based on this finding, we compared the hydrophobic root and soil chemical profiles of bitou bush and acacia to determine whether bitou bush roots release allelopathic compounds that are novel to the invaded system. We detected three compounds that were exclusive to the bitou bush root and soil, and seven compounds that were common to the bitou bush and acacia roots but only present in the bitou bush soil. The compounds unique to the bitou bush invaded soil were all sesqui- and diterpenes. Several of these compounds were found to inhibit the seedling growth of a native sedge, Isolepis nodosa (Rott.) R. Br. Of particular interest are the sesquiterpenes: β-maaliene, α-isocomene, β-isocomene, δ-cadinene, 5-hydroxycalamenene and 5-methoxycalamenene which were found in high concentrations in the bitou bush root and soil extracts and exhibited phytotoxic activity. Therefore, we present evidence to suggest that bitou bush exudes low molecular weight volatile compounds into the soil which inhibit native plant seedling growth. The reduced establishment of native plants via allelopathy is likely to create space and contribute to the invasion of bitou bush on the eastern Australian coast.