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Abstract Background and Aims The processes that maintain variation in the prevalence of symbioses within host populations are not well understood. While the fitness benefits of symbiosis have clearly been shown to drive changes in symbiont prevalence, the rate of transmission has been less well studied. Many grasses host symbiotic fungi (Epichloë spp.), which can be transmitted vertically to seeds or horizontally via spores. These symbionts may protect plants against herbivores by producing alkaloids or by increasing tolerance to damage. Therefore, herbivory may be a key ecological factor that alters symbiont prevalence within host populations by affecting either symbiont benefits to host fitness or the symbiont transmission rate. Here, we addressed the following questions: Does symbiont presence modulate plant tolerance to herbivory? Does folivory increase symbiont vertical transmission to seeds or hyphal density in seedlings? Do plants with symbiont horizontal transmission have lower rates of vertical transmission than plants lacking horizontal transmission? Methods We studied the grass Poa autumnalis and its symbiotic fungi in the genus Epichloë. We measured plant fitness (survival, growth, reproduction) and symbiont transmission to seeds following simulated folivory in a 3-year common garden experiment and surveyed natural populations that varied in mode of symbiont transmission. Key Results Poa autumnalis hosted two Epichloë taxa, an undescribed vertically transmitted Epichloë sp. PauTG-1 and E. typhina subsp. poae with both vertical and horizontal transmission. Simulated folivory reduced plant survival, but endophyte presence increased tolerance to damage and boosted fitness. Folivory increased vertical transmission and hyphal density within seedlings, suggesting induced protection for progeny of damaged plants. Across natural populations, the prevalence of vertical transmission did not correlate with symbiont prevalence or differ with mode of transmission. Conclusions Herbivory not only mediated the reproductive fitness benefits of symbiosis, but also promoted symbiosis prevalence by increasing vertical transmission of the fungus to the next generation. Our results reveal a new mechanism by which herbivores could influence the prevalence of microbial symbionts in host populations.