The smut fungus Ustilago esculenta infects Zizania latifolia and induces stem expansion to form a unique vegetable named Jiaobai. Although previous studies have demonstrated that hormonal control is essential for triggering stem swelling, the role of hormones synthesized by Z. latifolia and U. esculenta and the underlying molecular mechanism are not yet clear. To study the mechanism that triggers swollen stem formation, we analyzed the gene expression pattern of both interacting organisms during the initial trigger of culm gall formation, at which time the infective hyphae also propagated extensively and penetrated host stem cells. Transcriptional analysis indicated that abundant genes involving fungal pathogenicity and plant resistance were reprogrammed to maintain the subtle balance between the parasite and host. In addition, the expression of genes involved in auxin biosynthesis of U. esculenta obviously decreased during stem swelling, while a large number of genes related to the synthesis, metabolism and signal transduction of hormones of the host plant were stimulated and showed specific expression patterns, particularly, the expression of ZlYUCCA9 (a flavin monooxygenase, the key enzyme in indole-3-acetic acid (IAA) biosynthesis pathway) increased significantly. Simultaneously, the content of IAA increased significantly, while the contents of cytokinin and gibberellin showed the opposite trend. We speculated that auxin produced by the host plant, rather than the fungus, triggers stem swelling. Furthermore, from the differently expressed genes, two candidate Cys2-His2 (C2H2) zinc finger proteins, GME3058_g and GME5963_g, were identified from U. esculenta, which may conduct fungus growth and infection at the initial stage of stem-gall formation.