The symbiotic phenotype of a lichen arises through the interaction and cooperation of two or more genetically unrelated partners. Ultrastructural and molecular methods were used to investigate the changes that take place during early stages of the lichenization process. The resynthesis of prethallus stages of Baeomyces rufus was studied by co-culturing under sterile conditions the isolated, axenically grown mycobiont and its green algal photobiont Elliptochloris bilobata. The lichenization process was monitored by SEM. One day after co-culture, symbionts were bound together by a newly secreted mucilage. By day 12, photobiont induced, morphological changes in the mycobiont were visible. Aerial hyphae grew around photobiont cells, showed a high frequency of branching and formed appressoria on the algal wall surface. By day 28, many photobiont cells were completely engulfed by hyphae and soredia-like clusters were observed. These morphological developments resemble lichenized structures formed in the natural lichen. cDNA-AFLP was used to investigate gene expression profiles on day 12 of co-culture. Differential gene expression patterns revealed that few genes were induced, and many fungal and algal genes seemed to be suppressed in the early stages of lichenization.