Piriformospora indica, an endophytic fungus of Sebacinales, colonizes the roots of many plant species including Arabidopsis thaliana. The symbiotic interaction promotes plant performance, growth and resistance/tolerance against abiotic and biotic stress. We demonstrate that exudated compounds from the fungus activate stress and defense responses in the Arabidopsis roots and shoots before the two partners are in physical contact. They induce stomata closure, stimulate reactive oxygen species (ROS) production, stress-related phytohormone accumulation and activate defense and stress genes in the roots and/or shoots. Once a physical contact is established, the stomata re-open, ROS and phytohormone levels decline, and the number and expression level of defense/stress-related genes decreases. We propose that exudated compounds from P. indica induce stress and defense responses in the host. Root colonization results in the down-regulation of defense responses and the activation of genes involved in promoting plant growth, metabolism and performance.