Transformation of Cladosporium fulvum with DNA containing a truncated copy of the hydrophobin gene HCf-1 causes co-suppression of hydrophobin synthesis in 30% of the transformants. The co-suppressed isolates have a hydrophilic phenotype, lower levels of HCf-1 mRNA than wild type and contain multiple copies of the plasmid integrated as tandem repeats at ectopic sites in the genome. Gene silencing is not associated with DNA cytosine methylation. Nuclear run-off experiments reveal that transcription rate of HCf-1 in the co-suppressed isolates is higher than in the untransformed strains, suggesting that silencing acts at the post-transcriptional level. We show, for the first time in fungi, that co-suppression is correlated with the presence of antisense RNA, and that this is synthesised on a DNA template. Derivatives showing reversion to the wild-type phenotype and restoration of HCf-1 gene expression were also observed. Reversion is associated with loss of some copies of the transgene. We propose that co-suppression is due to ectopic integration of the transgene next to promoters which initiate transcription to form antisense RNA and that this in turn determines down-regulation of HCf-1.