Many Epichloë endophytes found in cool-season grasses are interspecific hybrids possessing much or all of the genomes of two or three progenitors. Here we characterize Epichloë canadensis sp. nov., a hybrid species inhabiting the grass species Elymus canadensis native to North America. Three distinct morphotypes were identified that were separated into two groups by molecular phylogenetic analysis. Sequence analysis of the translation elongation factor 1-α (tefA) and β-tubulin (tubB) genes revealed two copies in all isolates examined. Phylogenetic analyses indicated that allele 1 of each gene was derived from Epichloë amarillans and allele 2 from Epichloë elymi. This is the first documentation of an interspecific hybrid endophyte derived from parents of strictly North American origins. Alkaloid gene profiling using primers specific to genes in the peramine, loline, indole-diterpene and ergot alkaloid pathways may indicate chemotypic variation in the ergot alkaloid and loline pathways between the assigned morphotypes. All isolates have the gene enabling the production of peramine but lack genes in the indole-diterpene biosynthesis pathway. Morphology and phylogenetic evidence support the designation of isolates from El. canadensis as a new interspecific hybrid species.