Recently, the occurrence of "Cenangium-dieback" has been frequent and devastating. Cenangium-dieback is caused by an endophytic fungus Cenangium ferruginosum in stressed pine trees. Progression of the disease in terms of molecular interaction between host and pathogen is not well studied and there is a need to develop preventive strategies. Thus, we simulated disease conditions and studied the associated transcriptomics, metabolomics, and hormonal changes. Pinus koraiensis seedlings inoculated with C. ferruginosum were analyzed both under drought and well-watered conditions. Transcriptomic analysis suggested decreased expression of defense-related genes in C. ferruginosum-infected seedlings experiencing water-deficit. Further, metabolomic analysis indicated a decrease in the key antimicrobial terpenoids, flavonoids, and phenolic acids. Hormonal analysis revealed a drought-induced accumulation of abscisic acid and a corresponding decline in the defense-associated jasmonic acid levels. Pathogen-associated changes were also studied by treating C. ferruginosum with metabolic extracts from pine seedlings (with and without drought) and polyethylene glycol to simulate the effects of direct drought. From RNA sequencing and metabolomic analysis it was determined that drought did not directly induce pathogenicity of C. ferruginosum. Collectively, we propose that drought weakens pine immunity, which facilitates increased C. ferruginosum growth and results in conversion of the endophyte into the phytopathogen causing dieback.