Strains of insect-pathogenic fungi with high virulence toward certain pest insects have great potential for commercial biological control applications. Identifying such strains has been a central theme in using fungi for biological control. This theme is supported by a persistent paradigm in insect pathology which suggests that the host insect is the predominant influence on the population genetics of insect-pathogenic fungi. In this study, a population genetics analysis of the insect-pathogenic fungus Metarhizium anisopliae from forested and agricultural habitats in Ontario, Canada, showed a nonrandom association of alleles between two distinct, reproductively isolated groups (index of multilocus association = 1.2). Analyses of the mitochondrial DNA showed no differences between the groups. The two groups were associated with different habitat types, and associations with insect hosts were not found. The group from forested areas showed an ability for cold-active growth (i.e., 8°C), while the group from the agricultural area showed an ability for growth at high temperatures (i.e., 37°C) and resilience to UV exposure. These results represent a significant paradigm shift; habitat selection, not host insect selection, drives the population structure of these insect-pathogenic deuteromycetous fungi. With each group we observed recombining population structures as well as clonally reproducing lineages. We discuss whether these groups may represent cryptic species. Worldwide, M. anisopliae may be an assembly of cryptic species, each adapted to certain environmental conditions. The association of fungal genotypes with habitat but not with host insects has implications on the criteria for utility of this, and perhaps other, fungal biocontrol agents.