Plant litter can alter ecosystems and promote plant invasions by altering resource availability, depositing phytotoxins, and transmitting microorganisms to living plants. Transmission of microorganisms from invasive plant litter to live plants may gain importance as invasive plants, which often escape pathogens upon introduction to a new range, acquire new pathogens over time. It is unclear, however, if invasive plant litter affects native plant communities by promoting disease. Microstegium vimineum is an invasive grass that suppresses native populations, in part through litter production, and has acquired new fungal leaf spot diseases since its introduction to the United States. In a greenhouse experiment, we evaluated how M. vimineum litter and its pathogens mediated competition with the native grass Elymus virginicus. Microstegium vimineum litter promoted disease on E. virginicus and suppressed establishment and biomass of both species. Litter had stronger negative effects on E. virginicus than M. vimineum, increasing the relative biomass of M. vimineum. Live plant competition reduced biomass of both species and live M. vimineum increased disease incidence on E. virginicus. Altogether, invasive grass litter suppressed both species, ultimately favoring the invasive species in competition, and increased disease incidence on the native species.