Technical Abstract: During a study on the fungal endophytic associations with some trees of the dry tropical forest of El Eden Ecological Reserve located in the northeast of the Yucatan Peninsula of Mexico, a new fungal species was isolated as an endophyte of a tree named chakah, chachah or huk´up by indigenous mayas. This fungus is characterized by producing a strong musty odor and absence of reproductive structures. Cultures of this fungus on PDA form a white felty colony with an uncolored reverse and a mycelium that grows slowly. Based on morphological and DNA sequence analyses, the Mexican isolate is related to but separated from Muscodor albus of the Xylariaceae and has not been previously described, therefore, Muscodor yucatanensis sp. nov. is described and illustrated. In addition, the new fungus produces a distinctive mixture of new bioactive volatile compounds and their chemical characterization is underway.