The development of ectomycorrhizas on inoculated eucalypt seedlings in commercial nurseries is often slow so that only a small percentage of roots are mycorrhizal at the time of outplanting. If mycorrhizal formation could be enhanced by co-inoculation with bacteria which promote rapid root colonisation by specific ectomycorrhizal fungi, as demonstrated by certain bacteria in the Douglas fir-Laccaria bicolor association, this would be of advantage to the eucalypt forest industry. Two bacterial isolates with a demonstrated Mycorrhization Helper Bacteria (MHB) effect on ectomycorrhiza formation between Pseudotsuga menziesii and Laccaria bicolor (S238), and seven Western Australian bacterial isolates from Laccaria fraterna sporocarps or ectomycorrhizas were tested in isolation for their effect on ectomycorrhizal development by three Laccaria spp. with Eucalyptus diversicolor seedlings. Mycorrhizal formation by L. fraterna (E710) as measured by percentage infected root tips, increased significantly (p < 0.05) by up to 296% in treatments coinoculated with MHB isolates from France (Pseudomonas fluorescens Bbc6 or Bacillus subtilis MB3), or indigenous isolates (Bacillus sp. Elf28 or a pseudomonad Elf29). In treatments coinoculated with L. laccata (E766) and the MHB isolate P. fluorescens (Bbc6) mycorrhizal development was significantly inhibited (p < 0.05). A significant Plant Growth Promoting Rhizobacteria (PGPR) effect was observed where the mean shoot d.w. of seedlings inoculated only with an unidentified bacterium (Elf21), was 49% greater than the mean of uninoculated controls (-fungus, -bacterium). Mean shoot d.w. of seedlings coinoculated with L. bicolor (S-238), which did not form ectomycorrhizas with E. diversicolor, and an unidentified bacterium (Slf14) or Bacillus sp. (Elf28) were significantly higher than uninoculated seedlings or seedlings inoculated with L. bicolor (S-238) alone. This is the first time that an MHB effect has been demonstrated in a eucalypt-ectomycorrhizal fungus association. These organisms have the potential to improve ectomycorrhizal development on eucalypts under nursery conditions and this is particularly important for fast growing eucalypt species where the retention time of seedlings in the nursery is of short duration (2–3 months).