Aims: The formation of sectors was observed during subculturing of an isolate of the entomopathogenic fungus Metarhizium anisopliae , a fungus used for biological control of insect pests. The aim of the investigation was to establish whether sector formation was accompanied by changes in physiological characters. Methods and Results: Four degenerative morphological states, with reduced sporulation capacity, were characterized. Subcultures were taken from each sector and four new culture lines established. The new lines were further subcultured every 21 d. A physiological assessment of each line was undertaken after 42 d using TLC of secondary metabolites and fluorogenic enzyme tests. Full sporulation capacity was not regained on subculture, although some cultures recovered partially. Changes in secondary metabolite profiles and the loss in detection of activity of specific enzymes were observed. Conclusions: Sector formation was frequently accompanied by changes in the ability to produce secondary metabolites and enzymes. Significance and Impact of Study: The results illustrate the importance of maintaining the stability of important cultures during routine subculture. The consequences could have significant implications if degenerate cultures are used as inocula for liquid fermentation cultures or industrial scale production.