Recent developments have increased our understanding of the evolution of mutualistic associations between Epichloë endophytes and their grass hosts. Most of the asexual species appear to be interspecific hybrids. Although endophytes form compatible associations with their natural hosts, transfers to other hosts elicit a range of incompatible reactions. Recently, the genes involved in the synthesis of the secondary metabolites ergot alkaloids and indole-diterpenes, which confer protective benefits on the association, have been cloned.