Changes in the species composition associated with the presence of Phytophthora cinnamomi Rands and changes in the potential activity of the fungus were measured at a dry sclerophyll forest site in Kinglake National Park. In soil infested with P. cinnamomi, both the percentage cover and density of the major overstorey species (Eucalyptus dives Schauer in Walp. and E. macrorhyncha F.Muell.) and major understorey species (Xanthorrhoea australis R.Br., Daviesia ulicifolia Andrews and Dillwynia phylicoides Cunn.) were significantly reduced, while both the cover and density of the sedge species (Gahnia sieberiana Kunth., Lepidosperma laterale R.Br.and L. semiteres F.Muell.) increased significantly. The density of the major grass species, Chionochloa pallida (R.Br.) S. W. L.Jacobs, did not change. Species that were susceptible to P. cinnamomi showed varying patterns of decline. Xanthorrhoea australis was the most sensitive to the presence of P. cinnamomi, showing an immediate and large decline in both percentage cover and density, while Daviesia ulicifolia was the least sensitive, showing a decline only at later stages of disease development in the vegetation. Lepidosperma laterale and L. seiiziteres were the major colonisers of the diseased vegetation at this site, and were succeeded by Gahnia sieberiana, which became the dominant sedge species in the diseased zone after the dead plants of X. australis had collapsed. A seasonal survey (1992-1994) of P. cinnamomi found the pathogen to be potentially active all year round at this site, with summer and winter maxima. A decline was measured in the potential activity of P. cinnamorni underneath diseased and dead plants of X. australis after a disease outbreak. The potential activity of P. cinnamomi was greatest in soil collected from the base of dying plants of X. australis and zero in soil from under dead and collapsed individuals of that species. A similar pattern of decline in the potential pathogen activity was measured for the same host species at disease sites in the Brisbane Ranges National Park and Angahook State Park. A similar consistent pattern of decline in the disease potential of P. cinnamomi in soil from under diseased and dead plants of X. australis was observed in a pot bioassay. This decline in disease potential was overcome by the addition of Eucalyptus sieberi L.A.S.Johnson seedlings and P. cinnamomi inoculum to the soil.