Epichloë species are systemic fungal endophytes that usually specialize in a certain group of related grass species. We examined the infection frequency of Epichloë festucae in populations of two fine fescue species (Festuca rubra and F. ovina) in natural and seminatural habitats at 86 study sites (total=2514 plants) across Finland and northern Norway. Infection incidence varied significantly among grass species and populations. A substantial number of the F. rubra and F. ovina populations (53 out of 77 and 25 out of 30, respectively) were either endophyte-free or had very low (<20%) infection frequencies. The highest infection frequencies were found in subarctic areas. Moreover, infection incidence differed between habitats. In the area with the highest infection frequencies, we used microsatellite markers to study genetic diversity and the rates of gene flow of E. festucae among 12 F. rubra populations. Twenty out of the 25 fungal genotypes detected with four microsatellite markers were carrying multiple alleles in at least one locus, indicating multiple infections or vegetative hybridization of the fungus. One dominant genotype occurred in all 12 populations, representing 63.5% of all isolates. We found a moderate level of average genotypic variation and a low level of genetic differentiation (Fst=0.0814). There was no correlation between infection frequency and genotypic diversity. Although the existence of a dominant genotype and the detected linkage disequilibrium suggest that the fungus is mainly asexual and vertically transmitted, the multiallelic loci and variation of genetic diversity among populations indicate occasional contagious spread and sexual or parasexual recombination of the fungus in some populations. Furthermore, the genotypes carrying multiallelic loci suggest the possibility of multiple infections or hybridization of the endophyte.