Endophytic fungus-tall fescue symbiosis can improve the rhizosphere physical quality, but contribution of oxygen-limited conditions on this change, particularly in semiarid and arid regions has not been established yet. Therefore, the objective of this study was to evaluate the effects of endophyte-tall fescue symbiosis on the rhizosphere quality indicators under different aeration conditions in a greenhouse pot experiment. The treatments were seven levels of air-filled porosity, AFP (0, 0.025, 0.050, 0.750, 0.100, 0.125 and 0.150 m3 m−3) in a sandy loam soil, and two genotypes (75C and 75B) of tall fescue (Festuca arundinacea = Schedonorus arundinaceus Schreb.) each with endophytic fungus Epichlöe coenophiala (E+) and without endophyte (E−). Soil biophysical properties were determined on the intact soil aggregates from rhizosphere zone: structural stability (by HEMC, high energy moisture characteristic), percent of water-stable aggregates, water repellency, basal soil respiration and soil organic matter. The results showed that by decreasing the AFP, and reducing redox potential to <300 mV, (i) all biophysical indices, and the activity and population of soil microorganisms (especially fungi) significantly decreased, (ii) the role of biological and chemical aggregators was reduced and soil structure degradation was intensified, and (iii) aggregate stability indices and water repellency were associated with the quality of soil organic matter, rather than its quantity. Soil structural stability under genotype 75B was higher and lower than genotype 75C for the oxygen-limited and non-limited conditions, respectively. Stability indices, water repellency and soil organic matter content were greater in the rhizosphere of E+ plants compared to E− ones. No significant differences were observed for the HEMC stability indices between 75B and 75C genotypes for E+ plants, whereas for the E− plants, they were significantly greater in genotype 75C. Endophytic fungi increased the rhizosphere aggregate stability through the water-repellent exudates, extension of root system and enhanced organic carbon storage especially under oxygen-limited conditions.