Infection with the endophyte Neotyphodium uncinatum (Gams, Petrini & Schmidt) Glenn, Bacon, Price & Hanlin may influence drought resistance and competitive ability of meadow fescue (Festuca pratensis Huds.). We determined endophyte‐related effects on some growth and physiological characteristics in one clone of meadow fescue. In a growth chamber experiment, meadow fescue and orchardgrass (Dactylis glomerata L.) were planted in pots as monocultures or binary mixtures, competing in the root systems. One group of plants was adequately watered to maintain the original pot weight (control). The other group was subjected to a gradually imposed water stress, defined as soil water deficit, during 25 d (stressed plants). After rewatering, plants were allowed to regrow for 3 wk. Endophyte infection increased shoot and root dry weight by 33 and 70%, respectively, in control meadow fescue plants, and by 24 and 69% in stressed plants. Infected (E +) plants had significantly greater competitive ability than noninfected (E−) plants when grown in E−/E+ binary mixture. In binary mixtures with orchardgrass, the competitive abilities of E− and E+ plants were reduced relative to that of E− and E+ plants grown as monocultures. In response to water stress, stomatal conductance was lower in E+ than in E− plants, regardless of root competition. Noninfected plants could not completely recover in leaf water potential when exposed to root competition with infected plants or orchardgrass. The greater competitive ability of E+ plants was related to improved root and shoot growth and enhanced drought resistance. Infection with N. uncinatum could confer a competitive advantage to the meadow fescue clone.