In diverse natural habitats of Europe, plants of Festuca rubra are commonly infected by the fungal endophyte Epichloë festucae. Under several circumstances, the association between the grass and the fungus has been shown to be mutualistic. Here, we conducted an experiment to study the differences in seed germination and mortality between infected (E+) and endophyte-free plants (E–) at different temperatures (12 and 25°C) and water potentials (0 and –0.5 MPa). Three half-sib lines of F. rubra, each composed of E+ and E– seeds, and derived from infected plants from semiarid grasslands were used. Although the endophyte effect depended on the incubation condition, germination percentage was significantly greater for E– (52%) than for E+ seeds (41%). Seed germination was more inhibited by the low water potential (75 v. 24% for –0.5 and 0.0 MPa, respectively), than by the high temperature (64 v. 35% for 25 and 12°C, respectively). However, mortality was highly dependent on the interaction between plant genotype and endophyte, and between temperature and water condition. It is remarkable that while highly dependent on the host genotype, there was a clear effect of endophyte increasing seed survival, especially in those treatments that were unfavourable for germination. For example, in the more restrictive treatment (25°C and –0.5 MPa), seed survival was on average, 44 and 39% for E+ and E–, respectively. In general, the endophyte affected seed characteristics of F. rubra by reducing the percentage of germination, but simultaneously increasing seed survival.