The transmission of parasites and pathogens among vertebrates often depends on host population size, host species diversity, and the extent of crowding among potential hosts, but little is known about how these variables apply to most vector-borne pathogens such as the arboviruses (arthropod-borne viruses). Buggy Creek virus (BCRV; Togaviridae: Alphavirus) is an RNA arbovirus transmitted by the swallow bug (Oeciacus vicarius) to the cliff swallow (Petrochelidon pyrrhonota) and the introduced house sparrow (Passer domesticus) that has recently invaded swallow nesting colonies. The virus has little impact on cliff swallows, but house sparrows are seriously affected by BCRV. For house sparrows occupying swallow nesting colonies in western Nebraska, USA, the prevalence of BCRV in nestling sparrows increased with sparrow colony size at a site but decreased with the number of cliff swallows present. If one nestling in a nest was infected with the virus, there was a greater likelihood that one or more of its nest-mates would also be infected than nestlings chosen at random. The closer a nest was to another nest containing infected nestlings, the greater the likelihood that some of the nestlings in the focal nest would be BCRV-positive. These results illustrate that BCRV represents a cost of coloniality for a vertebrate host (the house sparrow), perhaps the first such demonstration for an arbovirus, and that virus infection is spatially clustered within nests and within colonies. The decreased incidence of BCRV in sparrows as cliff swallows at a site increased reflects the “dilution effect,” in which virus transmission is reduced when a vector switches to feeding on a less competent vertebrate host.