Acremonium coenophialum Morgan-Jones and Gams, an endophytic fungus commonly found in tall fescue (Festuca arundinacea Schreb.), has been identified as the cause of poor performance of beef cattle and horses on tall fescue. Ryegrass staggers, a neurological disorder of sheep, has been linked to the presence of a similar fungus, A. lolii Latch, Christensen and Samuels, in perennial ryegrass (Lolium perenne L.). Renovation of endophyte-infected (E+) pastures with endophyte-free (E-) cultivars of tall fescue or perennial ryegrass has resulted in improved animal performance, but productivity and stand persistence of the grasses have been reduced. Stand loss of E- tall fescue has been attributed to a number of stresses, including insect attack, disease, root predation by nematodes, and drought stress. The Acremonium endophyte has been observed to stimulate the tall fescue plant's production of chitinase, an enzyme associated with disease resistance. Nematode resistance, which can also be enhanced in E+ plants, has been attributed, in part, to thickening of the root endodermal layer. Drought stress has been identified as the most common cause of E- tall fescue stand loss in the eastern United States. Endophyte-infected tall fescue plants exhibit several adaptive morphological and physiological responses to drought stress compared with E- plants. Drought-induced leaf rolling, leaf senescence, stomatal closure, and osmotic adjustment are more prevalent in E+ than in E- plants and may be mediated through endophyte enhancement of the production of phytohormones such as abscisic acid. Endophyte-infected tall fescue plants have been shown to be more productive and competitive than E- plants through improvement of germination, tillering, and biomass production per tiller.(ABSTRACT TRUNCATED AT 250 WORDS)