Why do parasites harm their hosts? The general understanding is that if the transmission rate and virulence of a parasite are linked, then the parasite must harm its host to maximize its transmission. The exact nature of such trade-offs remains largely unclear, but for vertebrate hosts it probably involves interactions between a microparasite and the host immune system. Previous results have suggested that in a homogeneous host population in the absence of super- or coinfection, within-host dynamics lead to selection of the parasite with an intermediate growth rate that is just being controlled by the immune system before it kills the host (Antia et al. 1994). In this paper, we examine how this result changes when heterogeneity is introduced to the host population. We incorporate the simplest form of heterogeneity--random heterogeneity in the parameters describing the size of the initial parasite inoculum, the immune response of the host, and the lethal density at which the parasite kills the host. We find that the general conclusion of the previous model holds: parasites evolve some intermediate growth rate. However, in contrast with the generally accepted view, we find that virulence (measured by the case mortality or the rate of parasite-induced host mortality) increases with heterogeneity. Finally, we link the within-host and between-host dynamics of parasites. We show how the parameters for epidemiological spread of the disease can be estimated from the within-host dynamics, and in doing so examine the way in which trade-offs between these epidemiological parameters arise as a consequence of the interaction of the parasite and the immune response of the host.