Stress is ubiquitous and disrupts homeostasis, leading to damage, decreased fitness, and even death. Like other organisms, mycorrhizal fungi evolved mechanisms for stress tolerance that allow them to persist or even thrive under environmental stress. Such mechanisms can also protect their obligate plant partners, contributing to their health and survival under hostile conditions. Here we review the effects of stress and mechanisms of stress response in mycorrhizal fungi. We cover molecular and cellular aspects of stress and how stress impacts individual fitness, physiology, growth, reproduction, and interactions with plant partners, along with how some fungi evolved to tolerate hostile environmental conditions. We also address how stress and stress tolerance can lead to adaptation and have cascading effects on population‐ and community‐level diversity. We argue that mycorrhizal fungal stress tolerance can strongly shape not only fungal and plant physiology, but also their ecology and evolution. We conclude by pointing out knowledge gaps and important future research directions required for both fully understanding stress tolerance in the mycorrhizal context and addressing ongoing environmental change.