The distribution of organisms in space can be an important mediator of species interactions, but its evolutionary effects on those interactions are only beginning to be explored. These effects may be especially relevant to pathogen-host interactions. A detailed understanding of how and when spatial structure will affect the evolution of pathogen traits is likely to aid our ability to control rapidly emerging infectious diseases. Here we review a growing body of theoretical studies suggesting that spatial structure can lead to the evolution of an intermediate pathogen transmission rate and virulence. We explain the results of these studies in terms of a competition-persistence trade-off. These studies strongly suggest that local host interactions, local host dispersal, and relatively low host reproduction rates create a host population spatial structure that enforces this trade-off and leads to the evolution of lower pathogen transmission rates and virulence. They also suggest that when spatial structure exists, it can dominate over the shape of the transmission-virulence trade-off in determining pathogen traits. We also identify important areas of future research, including quantifying pathogen fitness in a spatial context in order to gain a more mechanistic understanding of the effects of spatial structure and observationally and experimentally testing theoretical predictions.