Soilborne pathogens, especially Fusarium oxysporum , are responsible for damping‐off and root necrosis in Eucalyptus nurseries. New technologies are increasingly considering strategies for plant disease control other than chemical fungicides. Among these, natural fungal antagonists, which are colonizers of the root cortex, are potential biocontrol agents. An in vitro system was used: (1) to test the pathogenic effects of F. oxysporum strain Foeu1 which was recovered from a forest nursery soil; (2) to explore the potential of the nonpathogenic F. oxysporum strain Fo47, which is known for its efficiency in biological control, to suppress damping‐off of Eucalyptus seedlings; (3) to compare the patterns of root colonization and host response to invasion by the two Fusarium strains inoculated separately in a time‐course study. Root inoculation of E. viminalis with F. oxysporum strain Foeu1 caused damping‐off in young seedlings in vitro , whilst disease symptoms were not visible in plants inoculated with F. oxysporum strain Fo47 or when both strains (Foeu1 + Fo47) were inoculated simultaneously. Each strain showed similarities in patterns of root tissue colonization, and in the processes of root penetration and initial colonization. Differential effects on root tissue were observed with fungal development within the cortex: ingress of strain Foeu1 was accompanied by severe host‐cell alterations whilst no tissue damage occurred with development of strain Fo47.