Epichloë species fungi form bioprotective endophytic symbioses with many cool-season grasses, including agriculturally important forage grasses. Despite its importance, relatively little is known about the molecular details of the interaction and the regulatory genes involved. The conserved velvet-domain protein VelA (or VeA) is a global regulator of a number of cellular and developmental functions in fungi. In this study, the E. festucae velA gene was functionally characterized in vitro and during interaction with perennial ryegrass. The velA gene is required in E. festucae for resistance to osmotic and cell wall-damaging stresses, repression of conidiation, and normal hyphal morphology during nutrient-limited in-vitro conditions. Expression of velA in E. festucae is light- and nitrogen-dependent and is tissue-specific in mature infected plants. In-planta studies showed that velA is required in E. festucae for a compatible interaction. Inoculating seedlings with mutant ΔvelA induced callose deposition and H2O2 production, and a high level of seedling death was observed. In surviving plants infected with ΔvelA mutant fungi, plants were stunted and we observed increased biomass and invasion of vascular bundles. Overall, this work characterizes a key fungal regulatory factor in this increasingly important model symbiotic association.