Ecological niches in the rhizosphere and phyllosphere of grasses capable of sustaining endophytes have been extensively studied. In contrast, little information regarding the identity and functions of endophytic fungi in stems is available. In this study, we investigated the taxonomic affinities, diversity, and host specificities of culturable endophytes in stems of wild rice (Oryza granulata) in China. Seventy-four isolates were recovered. Low recovery rate (11.7%) indicated that there were relatively few sites for fungal infection. Identification using morphology, morphospecies sorting, and molecular techniques resulted in classification into 50 taxa, 36 of which were recovered only once. Nucleotide sequence similarity analysis indicated that 30% of the total taxa recovered were highly divergent from known species and thus may represent lineages new to science. Most of the taxa were classified as members of the classes Sordariomycetes or Dothideomycetes (mainly in Pleosporales). The presence of Arthrinium and Magnaporthaceae species, most often associated with poaceous plants, suggested a degree of host specificity. A polyphasic approach was employed to identify two Muscodor taxa based on (i) ITS and RPB2 phylogenies, (ii) volatile compounds produced, and (iii) an in vitro bioassay of antifungal activity. This to our knowledge is only the second report regarding the isolation of Muscodor spp. in China. Therefore, we hypothesize that wild plants represent a huge reservoir of unknown fungi. The prevalence, novelty, and species-specificity of unique isolates necessitate a reevaluation of their contribution to ecosystem function and fungal biodiversity.