Sheath blight is an important disease caused by Rhizoctonia cerealis that affects wheat yields worldwide. No wheat varieties have been identified with high resistance or immunity to sheath blight. Understanding the sheath blight resistance mechanism is essential for controlling this disease. In this study, we investigated the response of wheat to Rhizoctonia cerealis infection by analyzing the cytological changes and transcriptomes of common wheat 7182 with moderate sensitivity to sheath blight and H83 with moderate resistance. The cytological observation showed that the growth of Rhizoctonia cerealis on the surface and its expansion inside the leaf sheath tissue were more rapid in the susceptible material. According to the transcriptome sequencing results, a total of 88,685 genes were identified in both materials, including 20,156 differentially expressed genes (DEGs) of which 12,087 was upregulated genes and 8,069 was downregulated genes. At 36 h post-inoculation, compared with the uninfected control, 11,498 DEGs were identified in resistant materials, with 5,064 downregulated genes and 6,434 upregulated genes, and 13,058 genes were detected in susceptible materials, with 6,759 downregulated genes and 6,299 upregulated genes. At 72 h post-inoculation, compared with the uninfected control, 6,578 DEGs were detected in resistant materials, with 2,991 downregulated genes and 3,587 upregulated genes, and 7,324 genes were detected in susceptible materials, with 4,119 downregulated genes and 3,205 upregulated genes. Functional annotation and enrichment analysis showed that the main pathways enriched for the DEGs included biosynthesis of secondary metabolites, carbon metabolism, plant hormone signal transduction, and plant-pathogen interaction. In particular, phenylpropane biosynthesis pathway is specifically activated in resistant variety H83 after infection. Many DEGs also belonged to the MYB, AP2, NAC, and WRKY transcription factor families. Thus, we suggest that the normal functioning of plant signaling pathways and differences in the expression of key genes and transcription factors in some important metabolic pathways may be important for defending wheat against sheath blight. These findings may facilitate further exploration of the sheath blight resistance mechanism in wheat and the cloning of related genes.