Acremonium coenophialum Morgan-Jones et W. Gams is a maternally transmitted fungal symbiont (endophyte) of the important forage grass Festuca arundinacea Schreb. (tall fescue), and provides biological protection and enhanced fitness to its host, but its anti-mammalian ergot alkaloids detract from the usefulness of tall fescue as forage for livestock. Molecular genetic techniques and materials are being developed in order to specifically eliminate the gene(s) encoding the first enzyme in ergot alkaloid biosynthesis. These techniques will also facilitate basic studies, such as host-fungus compatibility or biosynthesis of insecticidal alkaloids. Molecular phylogenetics indicate that endophytes related to A. coenophialum have evolved on multiple occasions from strains of Epichloë typhina (Ascomycotina, Clavicipitaceae), for which the sexual cycle is known. These studies also reveal significant diversity among seedborne endophytes in individual grass species. Thus, the endophytes are an important source of biochemical potential and genetic diversity in grass-fungus symbiota.