Internal oxidative stress can trigger microsclerotia (MS) formation of Metarhizium rileyi in liquid culture. Activator protein 1 (AP1) is a transcription factor and an important determinant of the response to oxidative stress. To investigate how M. rileyi responds to internal oxidative stress and how MS development is regulated, the Mrap1 gene was characterized. Mrap1 was highly expressed during periods of invasive hyphal growth and in response to changing culture conditions during MS development. Compared with the wild-type and complemented strains, Delta Mrap1 mutants exhibited various defects in aerial hyphal growth, yeast-to-hypha transition, and conidia and MS formation. Delta Mrap1 mutants also displayed sensitivity to oxidative stress, were morphologically abnormal, and responded differently to oxidative stress during MS development. Delta Mrap1 mutants had significantly reduced conidial (74-82%) and MS (99%) yields. Insect bioassays revealed that Delta Mrap1 mutants displayed reduced virulence in topical (43-76%) and injection (45-70%) bioassays. Moreover, the ability of Delta Mrap1 mutants to grow out of the cuticle was reduced due to impaired conidiation on the host cadaver. Digital gene expression profiling revealed that genes involved in antioxidation, pigment biosynthesis, and ion transport were regulated by Mrap1 during MS development. Taken together, our results confirm the importance of Mrap1 in vegetative growth, conidia and MS formation, and virulence.