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Invasive fungal infections are associated with high mortality, which is exacerbated by the limited antifungal drug armamentarium and increasing antifungal drug resistance. Echinocandins are a frontline antifungal drug class targeting β-glucan synthase (GS), a fungal cell wall biosynthetic enzyme. Echinocandin resistance is generally low but increasing in species like Candida glabrata, an opportunistic yeast pathogen colonizing human mucosal surfaces. Mutations in GS-encoding genes (FKS1 and FKS2 in C. glabrata) are strongly associated with clinical echinocandin failure, but epidemiological studies show that other, as yet unidentified factors also influence echinocandin susceptibility. Furthermore, although the gut is known to be an important reservoir for emergence of drug-resistant strains, the evolution of resistance is not well understood. Here, we studied the evolutionary dynamics of C. glabrata colonizing the gut of immunocompetent mice during treatment with caspofungin, a widely-used echinocandin. Whole genome and amplicon sequencing revealed rapid genetic diversification of this C. glabrata population during treatment and the emergence of both drug target (FKS2) and non-drug target mutations, the latter predominantly in the FEN1 gene encoding a fatty acid elongase functioning in sphingolipid biosynthesis. The fen1 mutants displayed high fitness in the gut specifically during caspofungin treatment and contained high levels of phytosphingosine, whereas genetic depletion of phytosphingosine by deletion of YPC1 gene hypersensitized the wild type strain to caspofungin and was epistatic to fen1Δ. Furthermore, high resolution imaging and mass spectrometry showed that reduced caspofungin susceptibility in fen1Δ cells was associated with reduced caspofungin binding to the plasma membrane. Finally, we identified several different fen1 mutations in clinical C. glabrata isolates, which phenocopied the fen1Δ mutant, causing reduced caspofungin susceptibility. These studies reveal new genetic and molecular determinants of clinical caspofungin susceptibility and illuminate the dynamic evolution of drug target and non-drug target mutations reducing echinocandin efficacy in patients colonized with C. glabrata. Author summary: Invasive fungal infections cause high mortality due to our limited antifungal drug armamentarium and increasing antifungal drug resistance. Echinocandins are a frontline antifungal class with increasing resistance in Candida glabrata, an opportunistic pathogen colonizing host mucosal surfaces. It is known that echinocandin-resistant C. glabrata isolates emerge from drug-sensitive gut-colonizing strains, but there are large knowledge gaps regarding how this resistance develops and whether it involves mutations in genes other than those encoding the echinocandin drug target. We studied the evolutionary dynamics in C. glabrata colonizing the mouse gut during treatment with caspofungin, a widely used echinocandin. In addition to well-described drug target mutations, we identified mutations in sphingolipid biosynthesis gene FEN1 rapidly and frequently emerging in the gut-colonizing fungus during caspofungin therapy. We also identified multiple loss-of-function fen1 mutations in clinical C. glabrata isolates and showed that they contribute to reduced caspofungin sensitivity of these strains. Together, this work illuminates the rich evolutionary dynamics of gut-colonizing fungi during antifungal therapy and identifies a new genetic determinant of reduced clinical caspofungin susceptibility. [ABSTRACT FROM AUTHOR]