Tea tree oil (TTO) is a yellow liquid extracted from Melaleuca alternifolia. Although the antimicrobial activity of TTO has been known for a long time, its specific antimicrobial effects and mechanism underlying these remain poorly characterized. The present study investigated the chemical composition of TTO and the dynamics and mechanism of its antimicrobial activities in two bacterial and two fungal strains. Gas chromatography-mass spectrometry analysis identified alkenes and alcohols as the main constituents of TTO. Terpinen-4-ol was the most abundant individual component, accounting for approximately 23% of the TTO. Poisoned food technique assessment showed that the minimum inhibitory concentrations of TTO for bacterial strains (Escherichia coli and Staphylococcus aureus) and fungal strains (Candida albicans and Aspergillus niger) were 1.08 and 2.17 mg/mL, respectively. Antimicrobial dynamic curves showed that with increasing concentrations of TTO, the rate of cell killing and the duration of growth lag phase increased correspondingly. These data indicated that TTO produced concentration and time-dependent antimicrobial effects. The minimum bactericidal and fungicidal concentrations of TTO were 2.17, 4.34, and 4.34 against E. coli, S. aureus, and C. albicans, respectively. However, A. niger conidia were not completely eradicated, even after 3 days in the presence of 17.34 mg/mL TTO. Transmission electron microscopy images indicated that TTO penetrated the cell wall and cytoplasmic membrane of all the tested bacterial and fungal strains. TTO may also penetrate fungal organelle membrane. These findings indicated that TTO maybe exerts its antimicrobial effects by compromising the cell membrane, resulting in loss of the cytoplasm and organelle damage, which ultimate leads to cell death.