Red rot, a stalk disease in sugarcane caused by Colletotrichum falcatum an ascomycete fungus is a serious production constraint in many Asian countries. However, very limited studies at molecular level exist of the mechanisms related to interaction between sugarcane and the fungal pathogen C. falcatum (Cf). In the conventional system of pathogen inoculation, disease development is influenced by prevailing environmental conditions in the field. Hence an attempt was made to standardize an in vitro system of using sugarcane suspension cells and crude elicitor of Cf for transcriptome analysis and identifying defense related genes. Suspension cells of sugarcane cv Co 93009 was treated with Cf-elicitor at 60 glucose equivalents and transcriptome profile was monitored 30 min and 3 h later by differential display RT-PCR. From the experiment 241 transcripts were found to be differentially expressed and finally 75 of them were cloned and sequenced. Among the up-regulated transcripts, about 37 % were found to be defense related and which was followed by transcription and post transcription (13 %), general metabolism (11 %), transport (9 %), cell structure/growth/division (9 %) and signal transduction (5 %). The down regulated transcript group constituted ~27 % of the differentially expressed transcripts and the grouping pattern was different. Overall, the results revealed up regulation of many potential defense related transcripts like putative chitinase, glycine rich protein, 14-3-3-like protein, xylanase inhibitor protein, calmodulin related protein, Myb-related transcription factor CBM2-like, basal layer antifungal peptide etc. Further by adopting RACE-PCR approach, complete gene sequences of 14-3-3-like protein and xylanase inhibitor were identified and the genes were characterized to domain level. Our results demonstrate that the transcript profile in in vitro system of sugarcane suspension cells and Cf-elicitor is close to the cane tissue challenged with the pathogen and useful to identify defense related traits in sugarcane against Cf.