Microbial symbionts can affect plant nutrition, defensive chemistry, and biodiversity. Here we test the hypothesis that symbionts alter the speed and direction of plant succession in communities that are shifting from grasslands to forests. A widespread C3 grass introduced to the United States, Lolium arundinaceum (tall fescue), hosts a fungal endophyte that is toxic to herbivores. In replicated experimental grasslands, the presence of the endophyte in tall fescue reduced tree abundance and size, altered tree composition, and slowed plant species turnover. In addition, consumption of tree seedlings by voles (Microtus spp.) was 65% higher in plots with the endophyte at the one grassland site where these data were collected. Despite its negligible contribution to community biomass, a microbial symbiont suppressed tree establishment, posing an important constraint on the natural transition from grasslands to forests.