Allelopathy plays an important role in plant-plant interactions, particularly through compounds released from litter exudates and decomposition. We conducted a greenhouse experiment to examine how additions of Cinnamomum septentrionale Hand. Mazz leaf litter (A) versus leaf litter aqueous extracts (B) can impact Eucalyptus grandis Hill ex Maid saplings, focusing on growth, physiology and photosynthesis. We show that both A and B significantly inhibited the growth and photosynthesis of E. grandis saplings, and this inhibition strengthened with increasing soil A content (range from 0 to 120 g pot−1) and concentrations of B (range from 0 to 80 g L−1). Additions of leaf litter or its aqueous extracts decreased chlorophyll content and intercellular CO2 concentration (Ci) while stomatal conductance (Gs) increased, reflecting that non-stomatal limitation might be the reason for the reduction of the photosynthetic rate. After treatment with A, the peroxidase (POD) and superoxide dismutase (SOD) activity were reduced, while there was a reduction in POD and non-changed SOD activity after treatment with B. Furthermore, sugar and proline levels declined under both A and B treatments. This study demonstrates that both A and B of C. septentrionale influenced the growth, chlorophyll synthesis and photosynthesis of E. grandis saplings, and caused oxidative damage in E. grandis. The Synthesis Effect (SE) indicates that B has stronger allelopathic effect than A under the same treatment. This stronger allelopathic effect of C. septentrionale leaf litter aqueous extracts than its decomposing leaf litter can be reflected by greater damage to membrane systems, and greater reductions of both chlorophyll content and photosynthesis on treated plants.