Abstract: An experiment was conducted during 2006-2009 to study whether modified atmosphere with varying carbon dioxide concentration can protect seed from fungal infestation. Lower CO2 concentration upto 40% was ineffective in the control of seed mycoflora, however high concentrations of carbon dioxide reduced fungal incidence but none of the carbon dioxide concentrations tested, completely controlled fungal infestation in paddy seed or rice grain. CO2 at 60-80% concentrations (v/v) reduced the incidence of storage fungi viz., Curvularia lunata, Cladosporium sp., Rhizopus stolonifer and Alternaria alternata on stored paddy seed. But 80% CO2 was required to control Aspergillus flavus, an aflatoxin producing fungi. Modified atmosphere with oxygen at 5% concentration resulted in higher incidence of storage fungi (52.0%) as compared to 48.0% in basmati rice exposed to modified atmosphere with 2% O2 concentrations and with CO2 concentrations varying from 0-20%.