Tall fescue (Schedonorus phoenix Scop.) is resistant to abiotic and biotic stresses through a symbiotic relationship with Neotyphodium coenophialum. However, this endophyte has been considered detrimental since it produces toxic alkaloids to animals. It is vital to understand mutuality between these two to maximize positive impact of the endophyte on agri-ecosystem. Little research has been conducted on endophyte transmission mechanism in planta. To provide basic information related to endophyte transmission, an experiment was conducted to examine the effect of endophyte genotype and water stress on endophyte transmission by imposing soil moisture deficits at different stages of panicle development. There was water stress effect on endophyte frequency but not on concentration, whereas endophyte genotype significantly influenced endophyte concentration in pseudostem of tall fescue at boot stage. Reproductive tillers showed greater endophyte frequency and concentration. Endophyte frequency in florets or seeds depended on position within panicle. There was no drought effect on endophyte concentration, but showed the effect of endophyte genotype on endophyte concentration in florets and seeds. Overall endophyte concentration in seeds was higher. From this study, we may conclude that although water stress reduced endophyte frequency in vegetative tiller, water stress does not have effect on endophyte transmission, suggesting that drought is not an important factor controlling the endophyte transmission from plant to seed. Endophyte genotype and seed position in a panicle affected endophyte transmission, indicating that these two factors are involved in endophyte transmission and may determine seed transmission of endophyte in tall fescue.