We describe the genetic transformation of the mycelial tissue of Diaporthe phaseolorum, an endophytic fungus isolated from the mangrove species Laguncularia racemosa, using Agrobacterium tumefaciens-mediated transformation (ATMT). ATMT uses both the hygromycin B resistant (hph) gene and green fluorescent protein as the selection agents. The T-DNA integration into the fungal genome was assessed by both PCR and Southern blotting. All transformants examined were mitotically stable. An analysis of the T-DNA flanking sequences by thermal asymmetric interlaced PCR (TAIL-PCR) demonstrated that the disrupted genes in the transformants had similarities with conserved domains in proteins involved in antibiotic biosynthesis pathways. A library of 520 transformants was generated, and 31 of these transformants had no antibiotic activity against Staphylococcus aureus, an important human pathogen. The protocol described here, using ATMT in D. phaseolorum, will be useful for the identification and analysis of fungal genes controlling pathogenicity and antibiotic pathways. Moreover, this protocol may be used as a reference for other species in the Diaporthe genus. This is the first report to describe Agrobacterium-mediated transformation of D. phaseolorum as a tool for insertional mutagenesis.