Sheath blight, caused by anastomosis group 1-IA of Rhizoctonia solani Kühn (teleomorph Thanatephorus cucumeris (Frank) Donk), is one of the most destructive rice diseases worldwide. The pathogen is able to infect plants belonging to more than 27 families, including many economically important monocots and dicots such as rice, wheat, alfalfa, bean, peanut, soybean, cucumber, papaya, corn, potato, tomato and sugar beet. It is a soil borne necrotrophic fungus that survives in plant debris as sclerotia, which are small brown-to-black, rocklike reproductive structures. The sclerotia can survive in the soil for several years and infect rice plants at the water-plant interface in the flooded field by producing mycelia. Management of rice sheath blight requires an integrated approach based on the knowledge of each stage of the disease and cytomolecular aspects of rice defence responses against R. solani. This review summarizes current knowledge on molecular aspects of R. solani pathogenicity, genetic structure of the pathogen populations, and the rice-R. solani interaction with emphasis on cellular and molecular defence components such as signal transduction pathways, various plant hormones, host defence genes and production of defence-related proteins involved in basal and induced resistance in rice against sheath blight disease.