Cryptococcus gattii is an emerging intracellular pathogen and the cause of the largest primary outbreak of a life-threatening fungal disease in a healthy population. Outbreak strains share a unique mitochondrial gene expression profile and an increased ability to tubularize their mitochondria within host macrophages. However, the underlying mechanism that causes this lineage of C. gattii to be virulent in immunocompetent individuals remains unexplained. Here we show that a subpopulation of intracellular C. gattii adopts a tubular mitochondrial morphology in response to host reactive oxygen species. These fungal cells then facilitate the rapid growth of neighbouring C. gattii cells with non-tubular mitochondria, allowing for effective establishment of the pathogen within a macrophage intracellular niche. Thus, host reactive oxygen species, an essential component of the innate immune response, act as major signalling molecules to trigger a 'division of labour' in the intracellular fungal population, leading to increased pathogenesis within this outbreak lineage.