Increased resilience of pasture grasses mediated by fungal Epichloë endophytes is crucial to pastoral industries. The underlying mechanisms are only partially understood and likely involve very different activities of the endophyte in different plant tissues and responses of the plant to these. We analyzed the transcriptomes of Epichloë festucae and its host Lolium perenne in host tissues of different function and developmental stages. The endophyte contributed approximately 10x more to the transcriptomes than to the biomass of infected tissues. Proliferating mycelium in growing host tissues highly expressed genes involved in hyphal growth. Non-proliferating mycelium in mature plant tissues, transcriptionally equally active, highly expressed genes involved in synthesizing anti-herbivore compounds. Transcripts from the latter accounted for 4% of fungal transcripts. Endophyte infection systemically but moderately increased transcription of L. perenne genes with roles in hormone biosynthesis and perception as well as stress and pathogen resistance, while reducing expression of genes involved in photosynthesis. There was a good correlation between transcriptome-based observations and physiological observations. Our data indicate that fitness-enhancing effect of the endophyte are based both on its biosynthetic activities, predominantly in mature host tissues, but also on systemic alteration of the host's hormonal responses and induction of stress response genes.