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Chilli anthracnose, incited by Colletotrichum capsici, is a major disease affecting the quality and quantity of chilli production. Farmers greatly depend on synthetic fungicides for the management of the disease. However, the extensive and non-judicious use of chemical fungicides resulted in the development of fungicide resistance in the pathogen and associated human and animal health risks. Piriformospora indica, a beneficial fungal root endophyte, has been employed as an efficient and safe biocontrol agent for managing bacterial, fungal and viral diseases and enhancing growth and yield. Hence, the present study was carried out to establish the protective role of P. indica against the chilli anthracnose incitant, C. capsici. The enzymes of phenylpropanoid pathway involved in this tripartite interaction were also studied. The study demonstrates that P. indica restricted C. capsici growth in dual culture with 57.22% mycelial inhibition on the 15th day after inoculation. P. indica ‒ colonized chilli plants showed a delay in disease development, and significantly reduced the incidence and severity of chilli anthracnose disease compared to the control plants. Higher activities of defence-related enzymes viz. peroxidase, phenylalanine ammonia-lyase, polyphenol oxidase, 4-coumaryl CoA ligase, cinnamyl alcohol dehydrogenase and total phenol in the P. indica ‒ colonised plants revealed that the endophyte early resistance of plants against further pathogen invasions. The present study revealed P. indica to be an efficient biocontrol agent against chilli anthracnose. The results showed that P. indica reduced the infection of C. capsici by direct antagonism, activation of enzymes involved in plant defence and enhanced growth in chilli plants.