Prosopis juliflora is a highly invasive tree species in semi-arid and arid regions in eastern Africa. Its ability to displace herbaceous and woody species has been attributed to allelopathic effects, but this has rarely been tested in competition experiments on natural soil and experimentally binding potentially allelopathic substances. We tested the effect of soil collected underneath and outside of P. juliflora canopy, or treated with P. juliflora leaf litter, on the survival, growth, and competitive ability of three resident tree species in the presence and absence of activated carbon. Survival and growth of tree seedlings were reduced on soil collected underneath P. juliflora canopy and on soil collected outside P. juliflora canopy mixed with leaf litter, compared to seedlings growing on soil collected outside P. juliflora canopy. When activated carbon was added, seedling performance increased on soil collected underneath P. juliflora canopy and particularly on soil collected outside P. juliflora canopy mixed with leaf litter. Competition reduced seedling height irrespective of the type of competitor (P. juliflora or resident tree species). There was no significant interaction between soil type and competition, indicating that the effect of competition was independent of soil type. The results suggest that P. juliflora releases allelochemicals into the soil, which have allelopathic effects on resident tree species, and that at least part of these allelochemicals originate from leaf material.