Multiple factors can affect the process of forest succession including seed dispersal patterns, seedling survival, and environmental heterogeneity. A relatively understudied factor affecting the process of succession is invasions by non-native plants. Invasions can increase competition, alter abiotic conditions, and provide refuge for consumers. Functional traits of trees such as seed size and life history stage may mediate the effects of invasions on succession. We tested the effects of the forest invader Microstegium vimineum on planted and naturally regenerating trees in a multi-year field experiment. We established plots containing nine species of small- and large-seeded tree species planted as seeds or saplings, and experimentally added Microstegium to half of all plots. Over 3 years, Microstegium invasion had an overall negative effect on small-seeded species driven primarily by the effect on sweetgum, the most abundant small-seeded species, but did not affect large-seeded species such as hickory and oak species, which have more stored seed resources. Natural regeneration was over 400% greater in control than invaded plots for box elder, red maple, and spicebush, and box elder seedlings were 58% smaller in invaded plots. In contrast to the effects on tree seedlings, invasion did not affect tree sapling survival or growth. Microstegium may be directly reducing tree regeneration through competition. Invaded plots had greater overall herbaceous biomass in 2006 and 2008 and reduced light availability late in the growing season. Indirect effects may also be important. Invaded plots had 120% more thatch biomass, a physical barrier to seedling establishment, and significantly greater vole damage to tree saplings during 2006 and 2007. Our results show that two tree functional traits, seed size and life history stage, determined the effects of Microstegium on tree regeneration. Suppression of tree regeneration by Microstegium invasions may slow the rate of forest succession and alter tree species composition.