ABSTRACT: The fungal endophytes Neotyphodium lolii and Neotyphodium sp. Lp1 from perennial ryegrass (Lolium perenne), and related endophytes in other grasses, produce the ergopeptine toxin ergovaline, among other alkaloids, while also increasing plant fitness and resistance to biotic and abiotic stress. In the related fungus, Claviceps purpurea, the biosynthesis of ergopeptines requires the activities of two peptide synthetases, LPS1 and LPS2. A peptide synthetase gene hypothesized to be important for ergopeptine biosynthesis was identified in C. purpurea by its clustering with another ergot alkaloid biosynthetic gene, dmaW. Sequence analysis conducted independently of the research presented here indicates that this gene encodes LPS1 [Tudzynski, P., Holter, K., Correia, T., Arntz, C., Grammel, N. & Keller, U. (1999) Mol. Gen. Genet. 261, 133-141]. We have cloned a similar peptide synthetase gene from Neotyphodium lolii and inactivated it by gene knockout in Neotyphodium sp. Lp1. The resulting strain retained full compatibility with its perennial ryegrass host plant as assessed by immunoblotting of tillers and quantitative PCR. However, grass-endophyte associations containing the knockout strain did not produce detectable quantities of ergovaline as analyzed by HPLC with fluorescence detection. Disruption of this gene provides a means to manipulate the accumulation of ergovaline in endophyte-infected grasses for the purpose of determining the roles of ergovaline in endophyte-associated traits and, potentially, for ameliorating toxicoses in livestock.