The entomopathogenic fungus Metarhizium anisopliae was physiologically manipulated by culturing in liquid culture under a range of water-stress conditions (0.98, 0.97 and 0.96 water activity, aw) imposed by either PEG 200, KCl or NaCl at 25 °C to optimise blastospore production and quality in terms of accumulation of endogenous compatible solutes and germinability. Optimum spore yield occurred at 0.98aw, when PEG 200 was the solute. Blastospores produced under different water-stress levels were subjected to hypo-osmotic and iso-osmotic washing treatments before quantification of endogenous sugar alcohols (polyols) and germinability studies. Endogenous amounts of the low molecular weight polyol erythritol were greatly affected by culture age, water-stress and hypotonic or isotonic washing treatment. Endogenous erythritol in blastospores produced under 0.98 and 0.97aw increased with culture age. Osmoprotection (washing with isotonic PEG 200 solution) of blastospores produced under all water-stress conditions resulted in retention of higher amounts of erythritol. Increased endogenous retention of the high molecular weight polyol mannitol was also observed with an isotonic washing treatment but only in blastospores produced under intermediate water-stress (0.98 and 0.97aw). Germination of all treatments was >90% on a medium with freely available water. Under water-stress conditions (0.96aw) only 10% of unmodified blastospores washed with water germinated. However, those grown under modified water availability conditions (0.98aw) and washed with isotonic solutions had significantly improved germination (38–90%). Blastospores produced at [les ]0.97aw washed with isotonic solutions had decreased germination. These results could have significant implications for conserving ecophysiological quality of fungal biocontrol propagules during harvesting and have an impact on storage and formulation.