Invasive species pose a major threat to native species, both through direct interactions, such as competition for resources, and indirect interactions, such as when the invasive species acts as a reservoir host for a virulent pathogen. Recent research has indicated that the recovery of native predators can benefit native prey species that compete with invasive prey, in circumstances where predation is more pronounced on the naïve invasive species. We use the native red squirrel (Sciurus vulgaris), invasive grey squirrel (Sciurus carolinensis) and shared squirrelpox virus (SQPV) system in North Wales, UK, as a case study system to assess the impact of a recovering, native predator of both squirrel species, the pine marten (Martes martes), on community structure. We develop a stochastic, spatial model that represents the habitat structure, distribution, and connectivity in North Wales and models the interactions of red and grey squirrels, SQPV, and pine marten to examine the indirect effect of native predator recovery on competitively linked native-invasive prey species and a viral pathogen. Our model demonstrates the potential role of native predators in reversing the replacement of a threatened native prey through the regulation of the invasive prey species due to sustained predation, and the resultant extirpation of a viral pathogen, which otherwise catalyses the replacement of the native red squirrel by the invasive grey squirrel. Our findings have system specific applied conservation implications, but moreover demonstrate the critical role of native predators in mitigating the impacts of invasive species and, indirectly, the infectious diseases they harbour.