To understand the relationship between mode of transmission and virulence, we investigated 2 microsporidian parasites in Daphnia magna laboratory populations. Pleistophora intestinalis is only transmitted horizontally, while Tuzetia sp. is transmitted vertically with high efficiency from mothers to parthenogenetic male and female offspring. We were not able to transmit Tuzetia horizontally in the laboratory. Tuzetia reduces host life-time reproductive success and host survival to a much greater extent than does P. intestinalis. Tuzetia-infected hosts were rapidly outcompeted by uninfected hosts. We suspect that Tuzetia infections may persist in natural populations by an as yet undiscovered horizontal transmission. It is possible that an alternate host species may be involved. We present a mathematical model to analyse the conditions for the persistence of a parasite with perfect vertical and an additional degree of horizontal transmission. We show that horizontal and vertical transmission contribute additively to a parasite's ability to invade and persist. Since the fitness contribution of horizontal transmission increases with population size, only very low transmission probabilities per host-to-host contact are necessary for the persistence of parasites occurring in large populations such as those commonly found for Daphnia. The detection of such low rates of horizontal transmission appears unlikely under laboratory conditions since the necessary number of host-to-host (or host-to-spore) contacts is not feasible. We review mechanisms that can maintain vertically transmitted parasites in nature.