Eucalyptus and Pill/IS plantations and adjacent natural forest in Shashemene-Munessa StaternForest were studied to investigate growth and establishment of seedlings of three indigenousrnspecies: Podocarpus falcatus, Bersallla abyssillica and Crotoll lIlacrostachyus. Density, distancernfrom individual plantation trees, seedling architecture, transpiration and photosyntheticrnperformance of understory indigenous plants were measured in order to investigate the nursingrneffect of plantation trees for the development of indigenous flora under their canopies.rnExamination of growth and establishment of study plants exhibited variations not only betweenrnplantations and adjacent natural forest but also between plantations themselves. Based on thernresults from measurements of density, distance from plantation trees and architecture ofrnregenerated study species, plantations supported higher natural regeneration development (stem!rnha) of indigenous species than adjacent natural forest (1950 vs 1260). P.falcatus was found to bernthe most successfully regenerated species in both plantations and adjacent natural forest. Morernregeneration (stem!ha) and closer establishment to individual trees of plantation species ofrnunderstory plants were found in Eucalyptus plantation indicating its better nursing effect thanrnPinus plantation. All study species had large number of individuals along the edge of Eucalyptusrnplantation. The seedling population of P. falcatus in Eucalyptus plantation had a densityrndistribution inversely related with distance from seed source: with large number of individualsrnnear the seed source and few individuals at further distance away from the seed source. Seedlingsrnof P. fttlcatus and B. abyssillica exhibited differences in architecture in the two stands. Seedlingsrnof both species in Eucalyptus plantation had more biomass distribution to branches and/or leavesrnto increase lateral growth than those in Pin liS plantation. These differences in seedling architectllre (stem growth and later,t1 growth) would probably reveal more need of silviculturalrntreatments for growth and establishment of indigenous plants in Pill liS than Ellca/)'p/lls stand.rnAnalysis of fluorescence parameters in the leaves of study specics showed no significantrndifference in the level of FvlFm, L'lF/F",', ETR and NPQ among species developed insidernplantations and adjaecnt natural forest. In Ellca/yp/lls plantation seedlings of 1'. ./ii/ca/lls and E.rnsaligl/a had similar photoS)~lthetic performance. From measurements of transpirationrnconsiderable variation was found bctween indigenous species and plantation species. Seedlings ofrnE. saliglla lose much more water through their leaves than those .. of P./aica/lis and B. a/Jyssillicarnwith increasing vapor pressure deficit (VPD), Most impoFtantly, large difference in watcr relationrnof E. saliglla and P./a/callis was recorded which indicates its better water usc. Comparison ofrnphotosynthetic performancc and water relations of seedlings of P. /aica/lis with E. sa/igllarnindicated the potential of p, Pi/CO/liS to grow inside Fllcalyp/lls plantation. The study supportedrnthe suggestion that plantations had nursing effects for growth and establishment of indigenousrnflora under their canopies. Furthermore, the importance of seed availability and overstory speciesrncomposition on the natural regeneration development of study species was also evident in thernstudy