Nursery practices influenced incidence and severity of diseases of Eucalyptus grandis viz. damping‐off caused by Pythium sp., Rhizoctonia solani and Cylindrocladium quinqueseptatum, web might by R. solani, seedling blight by C. quinqueseptatum and shoot wilt by Sclerotium rolfsii. Growth of seedlings of E. grandis and microclimatic conditions were also affected by nursery practices. Shading with coconut leaf thatch led to low light intensity (av. 1463 lux) with high soil water potential, low soil and ambient temperatures and high severity of damping‐off and web blight diseases and poor shoot:root ratio of seedlings. Seed beds under coirmat had dispersed light (av. 22 299 lux), apparently high severity of seedling blight and shoot wilt and good growth (snoot:root ratio) of seedlings. In both the types of shading high soil moisture regime and high seed rate contributed to high disease severity as well as low shoot:root ratio of seedlings. Copyright {\textcopyright} 1992, Wiley Blackwell. All rights reserved