Oat (Avena sativa) is susceptible to Fusarium head blight (FHB). The quality of oat grain is threatened by the accumulation of mycotoxins, particularly the trichothecene deoxynivalenol (DON), which also acts as a virulence factor for the main pathogen Fusarium graminearum. The plant can defend itself, e.g., by DON detoxification by UGT-glycosyltransferases (UTGs) and accumulation of PR-proteins, even though these mechanisms do not deliver effective levels of resistance. We studied the ability of the fungal biocontrol agent (BCA) Clonostachys rosea to reduce FHB and mycotoxin accumulation. Greenhouse trials showed that C. rosea-inoculation of oat spikelets at anthesis 3 days prior to F. graminearum inoculation reduced both the amount of Fusarium DNA (79%) and DON level (80%) in mature oat kernels substantially. DON applied to C. rosea-treated spikelets resulted in higher conversion of DON to DON-3-Glc than in mock treated plants. Moreover, there was a significant enhancement of expression of two oat UGT-glycosyltransferase genes in C. rosea-treated oat. In addition, C. rosea treatment activated expression of genes encoding four PR-proteins and a WRKY23-like transcription factor, suggesting that C. rosea may induce resistance in oat. Thus, C. rosea IK726 has strong potential to be used as a BCA against FHB in oat as it inhibits F. graminearum infection effectively, whilst detoxifying DON mycotoxin rapidly.