Disease resistance strategies are powerful approaches to sustainable agriculture because they reduce chemical input into the environment. Recently, Piriformospora indica , a plant-root-colonizing basidiomycete fungus, has been discovered in the Indian Thar desert and was shown to provide strong growth-promoting activity during its symbiosis with a broad spectrum of plants [Verma, S. et al. (1998) Mycologia 90, 896-903]. Here, we report on the potential of P. indica to induce resistance to fungal diseases and tolerance to salt stress in the monocotyledonous plant barley. The beneficial effect on the defense status is detected in distal leaves, demonstrating a systemic induction of resistance by a root-endophytic fungus. The systemically altered “defense readiness” is associated with an elevated antioxidative capacity due to an activation of the glutathione-ascorbate cycle and results in an overall increase in grain yield. Because P. indica can be easily propagated in the absence of a host plant, we conclude that the fungus could be exploited to increase disease resistance and yield in crop plants.