Background: To cause an economically important blast disease on rice, the filamentous fungus Magnaporthe oryzae forms a specialized infection structure, called an appressorium, to penetrate host cells. Once inside host cells, the fungus produces a filamentous primary hypha that differentiates into multicellular bulbous invasive hyphae (IH), which are surrounded by a host-derived membrane. These hyphae secrete cytoplasmic effectors that enter host cells presumably via the biotrophic interfacial complex (BIC). The first IH cell, also known as the side BIC-associated cell, is a specialized effector-secreting cell essential for a successful infection. This study aims to determine cellular processes that lead to the development of this effector-secreting first IH cell inside susceptible rice cells. Results: Using live-cell confocal imaging, we determined a series of cellular events by which the appressorium gives rise to the first IH cell in live rice cells. The filamentous primary hypha extended from the appressorium and underwent asymmetric swelling at its apex. The single nucleus in the appressorium divided, and then one nucleus migrated into the swollen apex. Septation occurred in the filamentous region of the primary hypha, establishing the first IH cell. The tip BIC that was initially associated with the primary hypha becomes the side BIC on the swollen apex prior to nuclear division in the appressorium. The average distance between the early side BIC and the nearest nucleus in the appressorium was estimated to be more than 32 μm. These results suggest an unknown mechanism by which effectors that are expressed in the appressorium are transported through the primary hypha for their secretion to the distantly located BIC. When M. oryzae was inoculated on heat-killed rice cells, penetration proceeded as normal, but there was no differentiation of a bulbous IH cell, suggesting its specialization for establishment of biotrophic infection. Conclusions: Our studies reveal cellular dynamics associated with the development of the effector-secreting first IH cell. Our data raise new mechanistic questions concerning hyphal differentiation in response to host environmental cues and effector trafficking from the appressorium to the BIC.