Stem bases of 210 Fraxinus excelsior trees of three different health categories were sampled by the means of an increment borer in declining ash stands in northern Lithuania. From this number, 15 sound-looking, 132 declining and 63 dead trees from three discrete plots yielded 352 isolates, representing 75 fungal species. In addition, mycelial fans and rhizomorphs typical of Armillaria spp. from 205 and 20 trees, respectively, were sampled and subjected to fungal isolations. Species richness was similar in trees from each health category, but community structures differed, indicating that species composition of wood-inhabiting fungi in stems changes along with the changes in tree health condition. Armillaria cepistipes was the most common species (86 isolates from 210 wood samples, or 41.0%), isolated more frequently and consistently than any other potential tree pathogen. It also showed abundant occurrence on a majority of trees in the form of mycelial fans and rhizomorphs, from which 64 and 14 isolates of the fungus were obtained, respectively. The population structure of A. cepistipes revealed the presence of 53–93 genets per hectare, some of which extended up to 30–55 m.