Ascophyllum nodosum (L.) Le Jolis has a systemic infection with the ascomycete Mycophycias ascophylli (Cotton) Kohlmeyer and Volkmann-Kohlmeyer with which it establishese a mutualistic symbiosis. In addition, A. nodosum is the host for the obligate red algal epiphyte, Vertebrata lanosa (L.) Christensen. Using light and electron microscopy we describe morphological and cytochemical changes occurring as a consequence of rhizoid penetration of V. lanosa into cortical host tissue. Rhizoids induce localized cell necrosis based on physical damage during rhizoid penetration. Host cells adjacent to the rhizoid selectively undergo a hypersensitive reaction in which they become darkly pigmented and become foci for hyphal development. Light and electron microscopy show that M. ascophylli forms dense hyphal aggregations on the surface of the V. lanosa rhizoid and extensive endophytic hyphal growths in the rhizoid wall. This is the first morphological evidence of an interaction between M. ascophylli and V. lanosa. We speculate that M. ascophylli may be interacting with V. lanosa to limit tissue damage to their shared host. In addition, the fungus provides a potential pathway for the transfer of materials (e.g., nutrients and photosynthate) between the two phototrophs.