Small GTPases of the Rac group play a key regulatory role in NADPH oxidase catalysed production of reactive oxygen species (ROS) in mammals and plants, but very little evidence is available for a corresponding role in fungi. We recently showed that ROS produced by a specific fungal NADPH oxidase isoform, NoxA, are crucial in regulating hyphal morphogenesis and growth in the mutualistic symbiotic interaction between Epichloë festucae and perennial ryegrass. We demonstrate here that E. festucae RacA is required for NoxA activation and regulated production of ROS to maintain a symbiotic interaction. Deletion of racA resulted in decreased ROS production, reduction of radial growth and hyper-branching of the hyphae in culture. In contrast, in planta the racA mutant showed extensive colonization of the host plant, resulting in stunting and precocious senescence of the host plants. Strains expressing a dominant active (DA) allele of RacA had increased ROS production, increased aerial hyphae and reduced radial growth. These results demonstrate that RacA plays a crucial role in regulating ROS production by NoxA, in order to control hyphal morphogenesis and growth of the endophyte in planta.