Interactions between invasive pest species, especially those mediated by microbial associates, are poorly understood. In this study, we examined the consequences for the woodwasp, Sirex noctilio, biocontrol program of the bark beetle Ips grandicollis, and its fungal associate, Ophiostoma ips. Pine trees treated with herbicide are used internationally to attract ovipositing S. noctilio and to introduce the biocontrol agent nematode, Beddingia siricidicola. This study measured the rate of drying in such trees with and without I. grandicollis, and studied the effect on emerging insects and fungal occupancy in wood. Ips grandicollis attack led to accelerated wood drying, reduced the percentage of nematode-parasitised S. noctilio of both sexes, and reduced the size of emerging females. There was a negative correlation between wood moisture content and O. ips occupancy in billets (bolts) whilst I. grandicollis infested trap trees had lower occupancy of the S. noctilio-associated fungus Amylostereum areolatum on which larval S. noctilio and B. siricidicola feed. The observed effects of I. grandicollis on S. noctilio are detrimental to the inoculative biocontrol program which requires high emergence of large, parasitised female S. noctilio to disperse the nematode agent in the wild population. Ophiostoma ips is known to competitively exclude A. areolatum so the association of O. ips with dry wood may be an indirect mechanism by which I. grandicollis adversely affects S. noctilio biocontrol. This new knowledge will guide changes to forestry practice to protect the efficacy of biocontrol of this serious pine pest.