Trichothecenes are a group of toxic secondary metabolites produced mainly by Fusarium graminearum (teleomorph: Gibberella zeae) during the infection of crop plants, including wheat, maize, barley, oats, rye and rice. Some fungal genes involved in trichothecene biosynthesis have been shown to encode regulatory proteins. However, the global regulation of toxin biosynthesis is still enigmatic. In addition to the production of secondary metabolites belonging to the trichothecene family, F. graminearum produces the red pigment aurofusarin. The gene regulation underlying the production of aurofusarin is not well understood. The velvet gene (veA) is conserved in various genera of filamentous fungi. Recently, the veA gene from Aspergillus nidulans has been shown to be the key component of the velvet complex regulating development and secondary metabolism. Using blast analyses, we identified the velvet gene from F. graminearum, FgVe1. Disruption of FgVe1 causes several phenotypic effects. However, the complementation of this mutant with the FgVe1 gene restores the wild-type phenotypes. The in vitro phenotypes include hyperbranching of the mycelium, suppression of aerial hyphae formation, reduced hydrophobicity of the mycelium and highly reduced sporulation. Our data also show that FgVe1 modulates the production of the aurofusarin pigment and is essential for the expression of Tri genes and the production of trichothecenes. Pathogenicity studies performed on flowering wheat plants indicate that FgVe1 is a positive regulator of virulence in F. graminearum.