Fungal endophytes mainly belong to the phylum Ascomycota and colonize plants without producing symptoms. We report on the isolation of seed-borne fungal endophytes from Phragmites australis (common reed) that were ascribed to the genus Stagonospora. Nested polymerase chain reaction (PCR) assays revealed that a Stagonospora sp. regularly colonized reed as shown for a period of three years. In spring, it was only detected in roots, whereas in autumn, it could frequently be found in all organs, including seeds. Microcosm experiments revealed that seeds harbored viable propagules of the fungus that colonized the developing germling, indicating vertical transmission. Endophytic growth was confirmed by immunofluorescence microscopy, reisolation of the fungus after surface sterilization, and PCR. Aseptic microcosms were established for studying fungal contributions towards host vitality. Several Stagonospora isolates enhanced reed biomass. Seed-borne endophytic Stagonospora spp. thus can provide improved vigor to common reed, which could be most important when seed-derived germlings establish new reed stands.