Although most characterized species of the fungal genus Colletotrichum are destructive pathogens, we found recently that C. tofieldiae (Ct) is an endemic endophyte in natural A. thaliana populations in Central Spain. Colonization by Ct initiates in roots, but can also spread systemically into shoots. Ct transfers the macronutrient phosphorus to shoots, promotes plant growth and increases fertility only under phosphorus-deficient conditions, a nutrient status that might have facilitated the transition from pathogenic to beneficial lifestyles. Comparative genome and transcriptome analyses between Ct and its closely related pathogenic species C. incanum (Ci) identified genomic signatures reflecting this recent transition from pathogenic to beneficial lifestyles, including a narrowed repertoire of secreted effector proteins, expanded families of secondary metabolism-related proteins, and limited activation of pathogenicity-related genes in planta. Analysis of the Arabidopsis transcriptome during root colonization by Ct revealed that beneficial responses are prioritized under phosphorus-deficient conditions whereas defense responses, involving ethylene and glucosinolate pathways, were activated under phosphorus-sufficient conditions. These data, together with the analysis of Arabidopsis mutants that are impaired in indole glucosinolate metabolism and the phosphate starvation response (PSR), provide evidence for a specific coordination between the PSR, the plant immune system and invasive fungal growth during beneficial interaction with Ct. Importantly, Arabidopsis immune responses were retained in phosphate-starved roots colonized by pathogenic Ci, illustrating the extraordinary ability of plants to maximize survival in response to conflicting stresses.