We discuss studies of foliar endophytic fungi (FEF) and arbuscular mycorrhizal fungi (AMF) associated with Theobroma cacao in Panama. Direct, experimentally controlled comparisons of endophyte free (E-) and endophyte containing (E+) plant tissues in T. cacao show that foliar endophytes (FEF) that commonly occur in healthy host leaves enhance host defenses against foliar damage due to the pathogen (Phytophthora palmivora). Similarly, root inoculations with commonly occurring AMF also reduce foliar damage due to the same pathogen. These results suggest that endophytic fungi can play a potentially important mutualistic role by augmenting host defensive responses against pathogens. There are two broad classes of potential mechanisms by which endophytes could contribute to host protection: (1) inducing or increasing the expression of intrinsic host defense mechanisms and (2) providing additional sources of defense, extrinsic to those of the host (e.g., endophyte-based chemical antibiosis). The degree to which either of these mechanisms predominates holds distinct consequences for the evolutionary ecology of host-endophyte-pathogen relationships. More generally, the growing recognition that plants are composed of a mosaic of plant and fungal tissues holds a series of implications for the study of plant defense, physiology, and genetics.