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Farnesol is an isoprenoid intermediate in the mevalonate (MVA) pathway and is produced by the dephosphorylation of farnesyl diphosphate. Farnesol plays a central role in cell growth and differentiation, controls production of ubiquinone and ergosterol, and participates in the regulation of filamentation and biofilm formation. Despite these important functions, studies of farnesol in filamentous fungi are limited, and information on its effects on antifungal and/or biocontrol activity is scarce. In the present article, we identified the Trichoderma harzianum gene dpp1 , encoding a diacylglycerol pyrophosphatase that catalyzes production of farnesol from farnesol diphosphate. We analyzed the function of dpp1 to address the importance of farnesol in Trichoderma physiology and ecology. Overexpression of dpp1 in T. harzianum caused an expected increase in farnesol production as well as a marked change in squalene and ergosterol levels, but overexpression did not affect antifungal activity. In interaction with plants, a dpp1 -overexpressing transformant acted as a sensitizing agent in that it up-regulated expression of plant defense salicylate-related genes in the presence of a fungal plant pathogen. In addition, toxicity of farnesol on Trichoderma and plants was examined. Finally, a phylogenetic study of dpp1 was performed to understand its evolutionary history as a primary metabolite gene. This article represents a step forward in the acquisition of knowledge on the role of farnesol in fungal physiology and in fungus-environment interactions.