Tea tree oil, also known as melaleuca oil, is an essential oil that comes from steaming the leaves of the Australian tea tree.When used topically, tea tree oil is believed to be antibacterial. Tea tree oil is commonly used to treat acne, athlete's foot, lice, nail fungus and insect bites. Tea tree oil is available as an oil and in many over-the-counter skin products, including soaps and lotions. However, tea tree oil should not be taken orally. If swallowed, it can cause serious symptoms.