Endophytes, both of bacterial and fungal origin, are ubiquitously present in all plants. While their origin and evolution are enigmatic, there is burgeoning literature on their role in promoting growth and stress responses in their hosts. We demonstrate that a salt-tolerant endophyte isolated from salt-adapted Pokkali rice, a Fusarium sp., colonizes the salt-sensitive rice variety IR-64, promotes its growth under salt stress and confers salinity stress tolerance to its host. Physiological parameters, such as assimilation rate and chlorophyll stability index were higher in the colonized plants. Comparative transcriptome analysis revealed 1348 up-regulated and 1078 down-regulated genes in plants colonized by the endophyte. Analysis of the regulated genes by MapMan and interaction network programs showed that they are involved in both abiotic and biotic stress tolerance, and code for proteins involved in signal perception (leucine-rich repeat proteins, receptor-like kinases) and transduction (Ca2+ and calmodulin-binding proteins), transcription factors, secondary metabolism and oxidative stress scavenging. For nine genes, the data were validated by qPCR analysis in both roots and shoots. Taken together, these results show that salt-adapted Pokkali rice varieties are powerful sources for the identification of novel endophytes, which can be used to confer salinity tolerance to agriculturally important, but salt-sensitive rice varieties.