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Endophytic fungi, especially asexual, systemic endophytes in grasses, are generally viewed as plant mutualists, mainly through the action of mycotoxins, such as alkaloids in infected grasses, which protect the host plant from herbivores. Most of the evidence for the defensive mutualism concept is derived from studies of agronomic grass cultivars, which may be atypical of many endophyte-host interactions. I argue that endophytes in native plants, even asexual, seed-borne ones, rarely act as defensive mutualists. In contrast to domesticated grasses where infection frequencies of highly toxic plants often approach 100%, natural grass populations are usually mosaics of uninfected and infected plants. The latter, however, usually vary enormously in alkaloid levels, from none to levels that may affect herbivores. This variation may result from diverse endophyte and host genotypic combinations that are maintained by changing selective pressures, such as competition, herbivory and abiotic factors. Other processes, such as spatial structuring of host populations and endophytes that act as reproductive parasites of their hosts, may maintain infection levels of seed-borne endophytes in natural populations, without the endophyte acting as a mutualist.