A pathogen's ability to persist in the environment is an ecologically important trait, and variation in this trait may promote coexistence of different pathogen strains. We asked whether naturally occurring isolates of the baculovirus that infects gypsy moth larvae varied in their overwinter environmental transmission and whether this variation was consistent with a trade-off or an upper limit to virulence that might promote pathogen diversity. We used experimental manipulations to replicate the natural overwinter infection process, using 16 field-collected isolates. Virus isolates varied substantially in the fraction of larvae infected, leading to differences in overwinter transmission rates. Furthermore, isolates that killed more larvae also had higher rates of early larval death in which no infectious particles were produced, consistent with a cost of high virulence. Our results thus support the existence of a cost that could impose an upper limit to virulence even in a highly virulent pathogen.