Diplodia pinea, an opportunistic and latent pathogen, can significantly affect Pinus productivity worldwide. Despite being studied in South Africa for almost 100 years, the source of D. pinea inoculum responsible for seedling infection is unknown. The aim of this study was to determine the role of seed in vertical transmission of D. pinea and to investigate sources of inoculum leading to horizontal transmission to pine seedlings. Surface-disinfected seeds were inoculated with spore and mycelium suspensions of D. pinea to determine its effect on germination. In addition, isolation of the fungus was performed from surface-disinfected seeds, asymptomatic seedlings collected from nurseries, plantations where pines naturally regenerate and recently established fields, to assess transmission and incidence of endophytic D. pinea infections. Inoculation of seeds with D. pinea spore suspensions affected speed and rate of germination. The fungus was isolated from surface-disinfected seeds in only a few instances (2–3%) and was not found in healthy seedlings collected from greenhouses and nurseries, suggesting that vertical transmission of the fungus does not occur or is rare. In contrast, D. pinea was isolated from 40% of seedlings obtained from the understory of mature P. patula trees showing that horizontal transmission from mature to young trees sustains the D. pinea inoculum in South African pine plantations.