Endophytes are commonly defined as fungi that colonize internal tissues of plants for all or part of their life cycle. The largest plant family hosting endophytes is Poaceae. Enhanced competitive ability of endophyte-infected grasses has been well documented, including improved shoot and root growth, and greater resistance to biotic and abiotic stresses. However, the role of endophytes on the allelopathic effect of host grass is less studied. Achnatherum sibiricum is a perennial sparse bunchgrass, which always occurs as an accompanying species, and is typically highly infected by fungal endophytes. A. sibiricum can be infected by three endophytic fungi, Neotyphodium sibiricum (Ns), Neotyphodium gansuensis (Ng), and Epichloë gansuensis (Eg). Early studies of A. sibiricum-endophyte symbiota suggested that endophyte infection could improve the growth and stress tolerance of A. sibiricum, allowing the host grass to adapt to stressful or even extreme environmental conditions. However, few studies have examined effects of endophyte infection on allelopathic performance of A. sibiricum. In our study, we selected the natural grass Stipa grandis, a dominant species in a native community of A. sibiricum, as our research subject. The allelopathic effect of water aqueous extracts of A. sibiricum with different endophyte infection levels on seed germination and seedling growth of S. grandis was tested in petri dishes in the laboratory. GC-MS were used to identify chemical components of aqueous extracts of A. sibiricum. The results were as follows:(1) Uninfected A. sibiricum elicited the strongest inhibitory effect on the germination and seedling growth of S. grandis. Endophyte infection could alleviate allelopathic effect of A. sibiricum on the target species. (2) The allelopathic effect of A. sibiricum was related to the endophyte species. Compared with endophyte-free A. sibiricum, Eg infection significantly alleviated the allelopathic effect of A. sibiricum, whereas Ns and Ng infection tended to alleviate the allelopathic potential of the host grass, although the difference was not significant. (3) Four allelochemicals in water aqueous extracts of A. sibiricum were identified via GC-MS, including 2,4-di-tert-butylphenol, phthalic acid, dibutyl phthalate, and methyl stearate. The relative difference in the amounts of these four allelochemicals may account for different allelopathic responses of A. sibiricum. (4) The allelopathic effect of the four potential allelochemicals was validated. The results showed that 2,4-di-tert-butylphenol had no significant effect on S. grandis at lower concentration, but was inhibitory at higher concentration, as compared to the control. Dibutyl phthalate showed a "low-promotion and high-inhibition effect", whereas phthalic acid and methyl stearate showed a "dose effect" on S. grandis. Therefore, the four potential allelochemicals could inhibit seed germination and seedling growth of S. grandis at higher concentrations.