All plants in natural ecosystems appear to be symbiotic with fungal endophytes. This highly diverse group of fungi can have profound impacts on plant communities through increasing fitness by conferring abiotic and biotic stress tolerance, increasing biomass and decreasing water consumption, or decreasing fitness by altering resource allocation. Despite more than 100 yr of research resulting in thousands of journal articles, the ecological significance of these fungi remains poorly characterized. Historically, two endophytic groups (clavicipitaceous (C) and nonclavicipitaceous (NC)) have been discriminated based on phylogeny and life history traits. Here, we show that NC-endophytes represent three distinct functional groups based on host colonization and transmission, in planta biodiversity and fitness benefits conferred to hosts. Using this framework, we contrast the life histories, interactions with hosts and potential roles in plant ecophysiology of C- and NC-endophytes, and highlight several key questions for future work in endophyte biology.