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Here, we analyzed the effects on <i>Capsicum annuum</i> plants of <i>Trichoderma atroviride</i> P. Karst strains altered in the expression of SWOLLENIN (SWO1), a protein with amorphogenic activity on plant cell wall components. Strains of <i>T. atroviride</i> that overexpressed the <i>Taswo1</i> gene were constructed as well as deletion mutants. A novel, cheap and accurate method for assessing root colonization was developed. Colonization assays showed that the <i>Taswo1</i> overexpressing strains invaded the host root better than the WT, resulting in a stronger plant growth-promoting effect. The expression of plant defense marker genes for both the systemic acquired resistance and induced systemic resistance pathways was enhanced in plants inoculated with <i>Taswo1</i> overexpressing strains, while inoculation with deletion mutant strains resulted in a similar level of expression to that observed upon inoculation with the wild-type strain. Response to pathogen infection was also enhanced in the plants inoculated with the <i>Taswo1</i> overexpressing strains, and surprisingly, an intermediate level of protection was achieved with the mutant strains. Tolerance to abiotic stresses was also higher in plants inoculated with the <i>Taswo1</i> overexpressing strains but was similar in plants inoculated with the wild-type or the mutant strains. Compatible osmolyte production in drought conditions was studied. This study may contribute to improving <i>Trichoderma</i> biocontrol and biofertilization abilities.