Phenolics can reduce soil nutrient availability, either indirectly by stimulating microbial nitrogen (N) immobilization or directly by enhancing physical protection within soil. Phenolic-rich plants may therefore negatively affect neighboring plant growth by restricting the N supply. We used a slow-growing, phenolic-rich alpine forb, Acomastylis rossii, to test the hypothesis that phenolic-rich carbon (C) fractions stimulate microbial population growth and reduce plant growth. We generated low-molecular-weight (LMW) fractions, tannin fractions, and total soluble C fractions from A. rossii and measured their effects on soil respiration and growth of Deschampsia caespitosa, a fast-growing, co-dominant grass. Fraction effects fell into two distinct categories: (1) fractions did not increase soil respiration and killed D. caespitosa plants, or (2) fractions stimulated soil respiration and reduced plant growth and plant N concentration while simultaneously inhibiting root growth. The LMW phenolic-rich fractions increased soil respiration and reduced plant growth more than tannins. These results suggest that phenolic compounds can inhibit root growth directly as well as indirectly affect growth by reducing pools of plant available N by stimulating soil microbes. Both mechanisms illustrate how below-ground phenolic effects may influence the growth of neighboring plants. We also examined patterns of foliar phenolic concentrations among populations of A. rossii across a natural productivity gradient (productivity was used as a proxy for competition intensity). Concentrations of some LMW phenolics increased significantly in more productive sites where A. rossii is a competitive equal with the faster growing D. caespitosa. Taken together, our results contribute important information to the growing body of evidence indicating that the quality of C moving from plants to soils can have significant effects on neighboring plant performance, potentially associated with phytoxic effects, and indirect effects on soil biogeochemistry.