Endophytic fungi associated with Stipa grandis in the Inner Mongolia steppe were investigated. Thirty-four fungal taxa were identified from plant tissues obtained in four treatments where different plant functional groups were removed. Nine taxa were obtained from leaves and 25 from roots; and no taxa occurred in both leaves and roots. Colonization rates were significantly higher in roots than in leaves. This finding differs from most previous studies and may be due to the small size of the leaves which grow annually, as compared to the roots which persist from year to year under the ground. Alternaria sp. 1 and Pyrenophora sp., both isolated from leaves, were the dominant species in the four treatments. Fusarium redolens was dominant in the roots in treatments I and II, and Phialophora sp. was dominant in treatments III and IV. Horizontal transmission of endophytes may occur between the same and different grass species. This would normally occur through the roots, again accounting for the higher diversity. The results suggest that surrounding plant diversity or plant composition can affect endophyte communities of S. grandis. If endophyte communities alter with change of functional plant groups, then this is likely to affect the dynamics of ecosystem functioning. Global warming and human activities can increase species extinction, therefore, if some functional groups disappear, then the fungi communities will also change.