Fungi of the order Sebacinales (Basidiomycota) are involved in a wide spectrum of mutualistic symbioses with various plants, thereby exhibiting unique potential for biocontrol strategies. Piriformospora indica, a model organism of this fungal order, is able to increase the biomass and grain yield of crop plants, and induces local and systemic resistance to fungal diseases and tolerance to abiotic stress. To elucidate the molecular basis for root colonization, we characterized the interaction of P. indica with barley roots by combining global gene expression profiling, metabolic profiling, and genetic studies. At the metabolic level, we show that fungal colonization reduces the availability of free sugars and amino acids to the root tip. At the transcriptional level, consecutive interaction stages covering pre-penetration-associated events and progressing through to root colonization showed differential regulation of signal perception and transduction components, secondary metabolism, and genes associated with membrane transport. Moreover, we observed stage-specific up-regulation of genes involved in phytohormone metabolism, mainly encompassing gibberellin, auxin and abscisic acid, but salicylic acid-associated gene expression was suppressed. The changes in hormone homoeostasis were accompanied with a general suppression of the plant innate immune system. Further genetic studies showed reduced fungal colonization in mutants that are impaired in gibberellin synthesis as well as perception, and implicate gibberellin as a modulator of the root's basal defence. Our data further reveal the complexity of compatibility mechanisms in host-microbe interactions, and identify gibberellin signaling as potential target for successful fungi.