Symbiosis between cool-season grasses and vertically transmitted fungal endophytes are common and significantly impact on ecosystem function. This makes the understanding of the underlying mechanisms to symbiotic individuals frequency in local populations much more interesting. Most studies have been focused on the differential fitness between symbiotic and non-symbiotic counterparts (relative fitness), barely considering other mechanisms. We performed a microcosms experiment to evaluate whether grazing alters the dynamics of the endophyte Neotyphodium occultans in the annual grass Lolium multiflorum by simultaneously modifying the relative fitness and the endophyte efficiency to be transmitted from host plants to seeds. Grazing was simulated by means of clipping and trampling on symbiotic and non-symbiotic plants growing separately, in soils obtained from paddocks, differing in their agronomic management history (natural grassland vs. ryegrass promotion). Seed production showed a complex pattern as it depended on the symbiotic status of the plants, the level of grazing and the agro-ecological context. Grazed plants produced three times fewer seeds than ungrazed plants only in microcosms with endophyte-symbiotic plants in soils from ryegrass promotion. Endophyte benefits on seed production were exclusively observed in ungrazed plants in the same soil. Symbiotic plants produced symbiotic and non-symbiotic seeds in all the treatments. While the production of non-symbiotic seeds by these plants was not affected by grazing and the soil, grazing reduced the production of symbiotic seeds in both contexts. Grazing negative effect on the density of fully infected spikes determined a significant increment in the transmission failures which were not modified by agro-ecological contexts. Therefore, grazing can modulate symbiosis dynamics through reducing seed production and endophyte transmission efficiency. Transmission has been disregarded, but it is a context-dependent process that could lead to a gradual reduction in the symbiotic plants frequency in a population if the mutualism effectiveness does not outweigh transmission failures.