Many Fusarium species cause serious diseases for cereal cultivation. These include Fusarium head blight and crown rot on wheat and bakanae disease on rice. These represent a major concern both in terms of food security and food safety. The latter is connected with the risk of mycotoxin contamination of grains. Biological control has proven its potential for controlling head blight and crown rot diseases of cereals caused by Fusarium species in a number of studies, and indeed several commercial products are under development. We review current knowledge of the mechanisms underlying biological control with a focus on fungal biocontrol agents, and also include challenges related to co-occurrence of Fusarium species. Several of the established biological control mechanisms (antibiosis, competition, hyperparasitism and induced resistance) can act simultaneously, thus resulting in disease control and, consequently, reduction of mycotoxin contamination. We also review the biological roles of some of the many mycotoxins produced by Fusarium species, and the mechanisms by which they are detoxified by cereal enzymes or by other fungi and how biological control agents (BCAs) can stimulate their degradation. Finally, the effect of biocontrol agents on the resident microbiota, as well as the effect of the resident microbiota on the performances of BCAs, are discussed. New perspectives on the use of biocontrol agents for the management of Fusarium diseases on cereals.