We have isolated five endophytic fungi from the roots of Capsicum annuum, Cucumis sativus and Glycine max. The culture filtrates (CF) of these endophytes were screened on dwarf mutant rice (Waito-C) and normal rice (Dongjin-byeo). Endophyte CAC-1A significantly inhibited the growth of Waito-C and Dongjin-byeo. Endophyte CAC-1A was identified as Paraconiothyrium sp. by sequencing the ITS rDNA region and phylogenetic analysis. The ethyl acetate fraction of Paraconiothyrium sp. suppressed the germination of Lactuca sativa and Echinochloa crus-galli seeds. The ethyl acetate fraction of the endophyte was subjected to bioassay-guided isolation and we obtained the phytotoxic compound ascotoxin (1) which was characterized through NMR and GC/MS techniques. Ascotoxin revealed 100% inhibitory effects on seed germination of Echinochloa crus-galli. Compound (1) was isolated for the first time from Paraconiothyrium sp.