Theory predicts that virulent parasites cannot be maintained at high prevalence if they are only vertically transmitted. However, parasites with high rates of vertical transmission that cause severe reduction in host fitness have been reported. Atkinsonella hypoxylon is a fungal pathogen capable of both vertical and horizontal transmission that drastically reduces its host's fitness. In contrast with theoretical predictions, field and laboratory observations suggested that the primary mechanism of transmission was vertical. Using randomly amplified polymorphic DNA markers, we investigated the effective contribution of vertical and horizontal transmission to the genetic structure of three natural populations of A. hypoxylon. We found high genotypic diversity and low linkage disequilibrium, indicating that most established genotypes are derived from horizontally transmitted, sexual spores. The low contribution of vertical transmission to the parasite's fitness despite its high potential might be due to lower establishment of cleistogamous seeds (through which vertical transmission occurs) or lower vigour of vertically transmitted fungal genotypes. Low establishment of vertically infected hosts might explain the persistence of virulent parasites with high apparent vertical transmission. Our results suggest that caution must be taken when using the potential for vertical transmission to make predictions about the evolution of parasite virulence.