Two methods to determine variability among strains of Phialocephala fortinii and sterile DSE (dark septate endophyte) Type 1 were compared: inter-simple sequence repeat polymerase chain reaction analysis (ISSRPCR) and sequence analysis of the two internal transcribed spacers and the 5.8S ribosomal DNA (ITS1-5.8S-ITS2). Both methods showed similar results for some strains, but different results for others. Phylogenetic analysis of various strains of P. fortinii and Type 1 based on ITS1-5.8S-ITS2 sequence information showed that Type 1 strains, with the exception of one Type 1 strain and a strain with a Type-1-like culture morphology, form a well-supported clade, whereas P. fortinii strains are much more variable and the relative position of many strains on the tree are unresolved. Two sterile DSE strains with Type 1 culture morphology form a well-supported clade, separate from the P. fortinii Type 1 clade. Phylogenetic analysis of some species of the Leotiales and of Phialocephala and related species based on ITS1-5.8S-ITS2 sequences indicate that the genera Phialocephala and Sporendocladia are polyphyletic. One major clade, supported by a high bootstrap value, is positioned as a well-separated lineage among members of the Leotiales. Phialocephala fortinii, Phialocephala dimorphospora, Phialocephala compacta, Phialocephala scopiformis, and Type 1, all known as endophytes of woody plant species, are positioned in this clade. A second well-supported clade including Phialocephala humicola, Phialocephala xalapensis, and Phialocephala fusca was positioned outside the Leotiales. Phialocephala xalapensis and P. humicola had identical sequences and were not separable based on morphology. The two taxa were, therefore, considered to represent the same species. Phialocephala virens, Phialophora finlandia, Sporendocladia foliicola, and Leptodontidium orchidicola were not included in either of the two Phialocephala clades.Key words: Phialocephala, phylogenetic analysis, internal transcribed spacer, DSE.