Sugarcane (Saccharum spp.) is a commercially important crop, vulnerable to fungal disease red rot caused by Colletotrichum falcatum Went. The pathogen attacks sucrose accumulating parenchyma cells of cane stalk leading to severe losses in cane yield and sugar recovery. We report development of red rot resistant transgenic sugarcane through expression of β-1,3-glucanase gene from Trichoderma spp. The transgene integration and its expression were confirmed by quantitative reverse transcription-PCR in first clonal generation raised from T0 plants revealing up to 4.4-fold higher expression, in comparison to non-transgenic sugarcane. Bioassay of transgenic plants with two virulent C. falcatum pathotypes, Cf 08 and Cf 09 causing red rot disease demonstrated that some plants were resistant to Cf 08 and moderately resistant to Cf 09. The electron micrographs of sucrose storing stalk parenchyma cells from these plants displayed characteristic sucrose-filled cells inhibiting Cf 08 hyphae and lysis of Cf 09 hyphae; in contrast, the cells of susceptible plants were sucrose depleted and prone to both the pathotypes. The transgene expression was up-regulated (up to 2.0-fold in leaves and 5.0-fold in roots) after infection, as compared to before infection in resistant plants. The transgene was successfully transmitted to second clonal generation raised from resistant transgenic plants. β-1,3-glucanase protein structural model revealed that active sites Glutamate 628 and Aspartate 569 of the catalytic domain acted as proton donor and nucleophile having role in cleaving β-1,3-glycosidic bonds and pathogen hyphal lysis.