Rice sheath blight, caused by Rhizoctonia solani, is one of the major rice diseases. In order to better understand the inhibitory mechanism of lauric acid on the disease, RNA sequencing (RNA-Seq) was used to analyze the transcriptome changes in Rhizoctonia solani treated with lauric acid for 3 h, 6 h, 18 h, and 24 h, including 2306 genes; 1994 genes; 2778 genes; and 2872 genes. Based on gene ontology (GO) enrichment and Kyoto Encyclopedia of Genes and Genomes (KEGG) pathway analyses, we found that protein processing in endoplasmic reticulum (KO04141), carbon metabolism (KO01200), and starch and sucrose metabolism were significantly enriched. Most oxidoreductase, dehydrogenase, reductase, and transferase genes are downregulated in this process. Lauric acid can affect ergosterol content, mitochondrial membrane potential collapse, hydrogen peroxide content, electrolyte leakage, reactive oxygen species balance, and can induce endoplasmic reticulum (ER) stress. Lauric acid also increased the expression levels of ER chaperone glucose regulatory protein Grp78 (BIP), protein disulfide isomerase (PDI), and Calpain (CNX), and decreased the expression levels of HSP40, HSP70, and HSP90 genes. Lauric acid affected the ergosterol content in the cell membrane of R. solani, which induces ER stress and increases the BiP level to induce the apoptosis of Rhizoctonia solani. These results indicated that lauric acid could be used to control rice sheath blight.