The biocontrol fungus Penicillium frequentans was grown on potato dextrose broth of either - 0.4 MPa water potential (unstressed) or reduced water potential (stressed) media modified with glycerol to -7.0 MPa. The endogenous compatible solutes and sugars were quantified after 5, 10 and 15 days growth. Glycerol was the main compatible solute accumulated at reduced water potential, with a concomitant decrease in erythritol and mannitol, and the sugar, glucose. Maximum accumulation of glycerol occurred in 5-day-old cultures, with the content in P. frequentans biomass produced at reduced water potential being about 180 times higher than that produced in unmodified medium (-0.4 MPa). There was no enhanced accumulation of the desiccation protectant trehalose. Homogenisation of cultures, for spray applications of the fungus, resulted in a partial loss of the solutes accumulated in the fungal biomass. P. frequentans controlled peach brown rot (Monilinia laxa) on peach twigs, with the disease index being significantly smaller when treated with the antagonist produced at reduced water potential. However, both inoculum types were able to reduce the length of lesions to a similar extent. This suggests that the inoculum of the antagonist produced in medium with freely available water (-0.4 MPa) becomes rapidly adapted to the dry environment in the phyllosphere, counteracting the possible initial advantage of the inoculum produced at reduced water potential (-7.0 MPa).