Mycovirus-infected fungi can suffer from poor growth, attenuated pigmentation, and virulence. However, the molecular mechanisms of how mycoviruses confer these symptoms remain poorly understood. Here, we report a mycovirus Stemphylium lycopersici alternavirus 1 (SlAV1) isolated from a necrotrophic plant pathogen Stemphylium lycopersici that causes altered colony pigmentation and hypovirulence by specifically interfering host biosynthesis of Altersolanol A, a polyketide phytotoxin. SlAV1 significantly down-regulates a fungal polyketide synthase ( PKS1 ), the core enzyme of Altersolanol A biosynthesis. PKS1 deletion mutants do not accumulate Altersolanol A and lose pathogenicity to tomato and lettuce. Transgenic expression of SlAV1 open-reading frame 3 (ORF3) in S. lycopersici inhibits fungal PKS1 expression and Altersolanol A accumulation, leading to symptoms like SlAV1-infected fungal strains. Multiple plant species sprayed with mycelial suspension of S. lycopersici or S. vesicarium strains integrating and expressing ORF3 display enhanced resistance against virulent strains, converting the pathogenic fungi into biocontrol agents. Hence, our study not only proves inhibiting a key enzyme of host phytotoxin biosynthesis as a molecular mechanism underlying SlAV1-mediated hypovirulence of Stemphylium spp., but also demonstrates the potential of mycovirus-gene integrated fungi as a potential biocontrol agent to protect plants from fungal diseases.