Chestnut blight, caused by the fungus Cryphonectria parasitica, has been effectively controlled with double-stranded RNA hypoviruses in Europe for over 40 years. The marked reduction in the virulence of C. parasitica by hypoviruses is a phenomenon known as hypovirulence. This virus-fungus pathosystem has become a model system for the study of biological control of fungi with viruses. We studied variation in tolerance to hypoviruses in fungal hosts and variation in virulence among virus isolates from a local population in Italy. Tolerance is defined as the relative fitness of a fungal individual when infected with hypoviruses (compared to being uninfected); virulence is defined for each hypovirus as the reduction in fitness of fungal hosts relative to virus-free hosts. Six hypovirus-infected isolates of C. parasitica were sampled from the population, and each hypovirus was transferred into six hypovirus-free recipient isolates. The resulting 36 hypovirus-fungus combinations were used to estimate genetic variation in tolerance to hypoviruses, in hypovirus virulence, and in virus-fungus interactions. Four phenotypes were evaluated for each virus-fungus combination to estimate relative fitness: (i) sporulation, i.e., the number of asexual spores (conidia) produced; (ii) canker area on field-inoculated chestnut trees, (iii) vertical transmission of hypoviruses into conidia, and (iv) conidial germination. Two-way analysis of variance (ANOVA) revealed significant interactions (P < 0.001) between viruses and fungal isolates for sporulation and canker area but not for conidial germination or transmission. One-way ANOVA among hypoviruses (within each fungal isolate) and among fungal isolates (within each hypovirus) revealed significant genetic variation (P < 0.01) in hypovirus virulence and fungal tolerance within several fungal isolates, and hypoviruses, respectively. These interactions and the significant genetic variation in several fitness characters indicate the potential for future evolution of these characters. However, biological control is unlikely to break down due to evolution of tolerance to hypoviruses in the fungus because the magnitudes of tolerance and interactions were relatively small.