An extraordinary level of length heterogeneity was found in the ribosomal DNA (rDNA) of an asexual hybrid Neotyphodium grass endophyte, isolate Lp1. This hybrid Neotyphodium endophyte is an interspecific hybrid between two grass endophytes, Neotyphodium lolii, and a sexual form, Epichlöe typhina, and the length heterogeneity was not found in either of these progenitor species. The length heterogeneity in the hybrid is localized to the intergenic spacer (IGS) and is the result of copy-number variation of a tandemly repeated subrepeat class within the IGS, the 111-/119-bp subrepeats. Copy number variation of this subrepeat class appears to be a consequence of mitotic unequal crossing over that occurs between these subrepeats. This implies that unequal crossing over plays a role in the concerted evolution of the whole rDNA. Changes in the pattern of IGS length variants occurred in just two rounds of single-spore purification. Analysis of the IGS length heterogeneity revealed features that are unexpected in a simple model of unequal crossing over. Potential refinements of the molecular details of unequal crossing over are presented, and we also discuss evidence for a combination of homogenization mechanisms that drive the concerted evolution of the Lp1 rDNA.