The Birch Hill Community Association received a £6,000 grant from the Big Lottery Fund last September and have since used the cash to carve animal shapes and a children's tunnel into the tree - which is on the green behind Lydney.
Pat Kennewell, who spearheaded the plans and the grant proposal, told the News she was delighted when the work was finally complete yesterday (Tuesday).
"I'm just blown away," she said. "The money has hugely paid off and all that work was absolutely worth it - it's everything I hoped it would be.
"The simplicity of it speaks for it self."
The pensioner hopes that the children will use the wooden creation as if it were like Alice's wonderland and said that they have already been playing in and around it.
Devonshire sculptor Greenspace Designs was commissioned to carve the tree and Mrs Kennewell added: "What they can do with a chainsaw is amazing!"