Summary Rhododendron maximum L., a spreading understory shrub, inhibits overstory regeneration and alters forest community structure in southern Appalachian hardwood forests. Using paired plots and reciprocal litter transplants in forests with and without R. maximum cover, we examined the influence of R. maximum on litter mass and quality, N cycling and soil extracellular enzymes. Standing stocks of soil organic matter, soil N, leaf litter mass and fine root biomass were greater in forests with R. maximum than those without. Tannin extracts from R. maximum foliage, and leaf litter and fine roots collected under R. maximum had a relatively high capacity to precipitate protein compared to extracts from trees. Across the growing season, soil inorganic N availability was generally lower under R. maximum , mostly due to reduced NO 3 − availability. Our data suggest that R. maximum litter alters N cycling through the formation of recalcitrant polyphenol–organic N complexes. Soil extracellular enzymes indicate the potential processing rates of organic substrates. Between forest types, polyphenol oxidase activity was greatest in R. maximum O horizons, regardless of litter type, suggesting that the local microbial community can better degrade and access protein–tannin-complexed N. Protease activity did not differ between forest types, but was greater on R. maximum leaf litter than hardwood leaf litter. The alteration of the N cycle via the formation of polyphenol–organic N complexes may contribute to hardwood seedling suppression, while the enzymatic release of these complexes by ericoid mycorrhizal fungi may increase N acquisition for R. maximum and contribute to its expansion in southern Appalachian forests.