Indirect genetic effects (IGEs) are heritable effects of individuals on trait values of their conspecifics. IGEs may substantially affect response to selection, but empirical studies on IGEs are sparse and their magnitude and correlation with direct genetic effects are largely unknown in plants. Here we used linear mixed models to estimate genetic (co)variances attributable to direct and indirect effects for growth and foliar disease damage in a large pedigreed population of Eucalyptus globulus. We found significant IGEs for growth and disease damage, which increased with age for growth. The correlation between direct and indirect genetic effects was highly negative for growth, but highly positive for disease damage, consistent with neighbour competition and infection, respectively. IGEs increased heritable variation by 71% for disease damage, but reduced heritable variation by 85% for growth, leaving nonsignificant heritable variation for later age growth. Thus, IGEs are likely to prevent response to selection in growth, despite a considerable ordinary heritability. IGEs change our perspective on the genetic architecture and potential response to selection. Depending on the correlation between direct and indirect genetic effects, IGEs may enhance or diminish the response to natural or artificial selection compared with that predicted from ordinary heritability.