Plants of red fescue (Festuca rubra), a commercially important turf grass, are infected by the fungal endophyte Epichloë festucae in semiarid natural grasslands, known as dehesas, in western Spain. We used amplified fragment length polymorphism (AFLP) markers to analyse the genetic polymorphism existing in two natural populations of Epichloë festucae. Linkage disequilibrium and the presence of clonal lineages indicated that nonrecombinant asexual reproduction predominates in both populations. However, most genetic variation detected was found to occur within populations, with only a moderate amount of genetic differentiation between populations (FST: 0.197). Overall, the study suggests that dehesa grasslands are useful reservoirs of Epichloë festucae endophytes, and provides information on population structure which is relevant to design sampling strategies.