The ancestor of termites relied on gut symbionts for degradation of plant material, an association that persists in all termite families.1,2 However, the single-lineage Macrotermitinae has additionally acquired a fungal symbiont that complements digestion of food outside the termite gut.3 Phylogenetic analysis has shown that fungi grown by these termites form a clade-the genus Termitomyces-but the events leading toward domestication remain unclear.4 To address this, we reconstructed the lifestyle of the common ancestor of Termitomyces using a combination of ecological data with a phylogenomic analysis of 21 related non-domesticated species and 25 species of Termitomyces. We show that the closely related genera Blastosporella and Arthromyces also contain insect-associated species. Furthermore, the genus Arthromyces produces asexual spores on the mycelium, which may facilitate insect dispersal when growing on aggregated subterranean fecal pellets of a plant-feeding insect. The sister-group relationship between Arthromyces and Termitomyces implies that insect association and asexual sporulation, present in both genera, preceded the domestication of Termitomyces and did not follow domestication as has been proposed previously. Specialization of the common ancestor of these two genera on an insect-fecal substrate is further supported by similar carbohydrate-degrading profiles between Arthromyces and Termitomyces. We describe a set of traits that may have predisposed the ancestor of Termitomyces toward domestication, with each trait found scattered in related taxa outside of the termite-domesticated clade. This pattern indicates that the origin of the termite-fungus symbiosis may not have required large-scale changes of the fungal partner.