The commensal, above ground fungus in ryegrass, known simply as the Lolium endophyte, which has been well studied in the past (McLennan, 1920; Sampson, 1935, 1937; Neil, 1940, 1941; Lloyd, 1959) has recently emerged as the bright new hope in the ryegrass stagger aetiology research. Fletcher and Harvey (1981) showed a highly significant correlation between the amount of infection in three ryegrass cultivars and the observed intensity of ryegrass staggers in a split plot randomised grazing trial at Lincoln. At the same time, a new group of neurotoxins, the lolitrems, were also being linked with ryegrass staggers by Gallagher et. al (1981). It would appear that an association between the endophyte and the host trigger the production of these lolitrems, but whether they are produced by the host in response to invasion of the intercellular space by the fungus (as is the case in the production of phytoalexins) or by the fungus itself in response to specific apoplastic nutrients supplied by the host, has not been fully established. Ironically, the Lolium endophyte was suggested the possible aetiological agent in ryegrass staggers several years ago. It was rejected, however, on three counts: Firstly, when axenic cultures of the fungus (grown on ryecorn seed) were fed to sparrows and mice, no ill effects were noted (Cunningham, 1958). Secondly, when endophyte-infected seed was fed to a range of animals, including one sheep, no toxicity was noted (Neil, 1941); and thirdly, it was considered by Neil in 1940 that "a widely distributed fungus such as Lo//urn endophyte could not be responsible for localised outbreaks of ryegrass staggers!' (Cunningham & Hartley, 1959). The Lincoln group of researchers have used two approaches to determine why these three factors caused such a rejection. Firstly, an ultrastructural study was carried out at Canterbury University on the interaction between the fungus and the host, and the nature of the fungus in seed and in pure culture (Fineran et al, in prep.; Gallagher et al. 1982). Secondly, a study of endophyte levels in some South Island pastures where outbreaks of ryegrass staggers had occurred was carried out (Harvey, 1982).