Three major classes of endophytic fungi were observed in the roots of native grasses and shrubs: (1) vesicular-arbuscular mycorrhizae (VAM), which are known to be important in water and nutrient uptake; (2) septate fungi that formed non-destructive interfaces within root cortex cells and exhibited mycorrhizal like characteristics; and (3) chytridiomycetes were the third major class of fungi observed and preliminary studies suggest they regulate colonization of VAM, septate fungi, and nutrient uptake.  A hypothesis is proposed on how these fungi function in accessing and managing nutrients and water for survival in arid ecosystems.