The hydrodistillated leaf essential oil of Neolitsea parvigemma was analyzed to determine its composition and yield. Sixty-two compounds were identified, the main components being β-caryophyllene (14.2%), β-eudesmol (12.9%), α-cadinol (10.2%) and τ-cadinol (8.8%). Oxygenated sesquiterpenes (48.9%) and sesquiterpene hydrocarbons (48.8%) were the predominant groups of compounds. The antifungal indexes of the leaf oil against the 7 fungi, Aspergillus clavatus, A. niger, Chaetomium globosum, Cladosporium cladosporioides, Myrothecium verrucaria, Penicillium citrinum and Trichoderma viride, were 100.0, 72.3, 100.0, 100.0, 100.0, 75.8 and 88.6% at a 1 mg/mL concentration, respectively. The oil also exhibited anti-wood-decay-fungi activity against Trametes versicolor, Phaneochaete chrysosporium, Phaeolus schweintizii, and Lenzites sulphureu with MIC values of 50, 50, 25 and 25 μg/mL, respectively. For the antifungal and anti-wood-decay fungal activities of the oil, the active source compounds were determined to be α-cadinol, β-eudesmol and τ-cadinol.