<p>Agroforestry systems integrating medicinal plants beneath tree canopies offer a sustainable land-use strategy for subtropical regions. However, the optimal canopy density required to balance light availability and nutrient dynamics remains poorly understood. This study examined the effects of canopy densities (0.2, 0.4, and 0.7) in <i>Dalbergia odorifera</i> plantations on the ecophysiological performance of understory-cultivated <i>Alpinia galanga</i> in Guangxi, China. We evaluated plant growth, leaf functional traits, nutrient dynamics, and soil properties to elucidate the underlying mechanisms driving system productivity. The results showed that moderate shading (0.4 canopy density) significantly promoted plant height, sprout formation, and the accumulation of leaf nitrogen (<i>N</i>) and phosphorus (<i>P</i>). In contrast, high canopy density (0.7) suppressed both leaf expansion and nutrient uptake. While low density (0.2) enhanced specific leaf area, it resulted in reduced potassium (<i>K</i>) accumulation due to high light exposure. Furthermore, soil analyses revealed improved moisture retention, aeration, and nutrient availability under the 0.4 canopy density, thereby facilitating robust root development and efficient nutrient acquisition. Principal component analysis (PCA) revealed an ecological trade-off between leaf morphological adaptation and nutrient utilization efficiency across the light gradient. These findings demonstrate that intermediate canopy cover (0.4 density) optimized the balance between light availability and microhabitat conditions, thereby enhancing both the productivity and ecological sustainability of <i>A. galanga</i> within <i>D. odorifera</i> agroforestry systems. Consequently, we recommend maintaining a canopy density of 0.4 for the <i>Dalbergia odorifera-Alpinia galanga</i> agroforestry system with targeted <i>N</i> addition. As canopy density increases, management practices should prioritize the monitoring of <i>K</i> levels.</p>