Geotrichum candidum causes sour rot of fresh-market stone fruit such as peach and nectarine. Since 2001, the incidence of sour rot has increased in California, a semi-arid production area, which is considered atypical for the occurrence of the disease. In this study, sour rot developed at significantly higher incidence on wounded fruit compared with unwounded fruit, and disease severity increased as fruit matured. In packinghouse surveys, sour rot was found on up to 4% of non-fungicide-treated peach and nectarine fruit. In laboratory assays, sour rot developed when fruit were inoculated with a minimum of 20 conidia per inoculation site. Inoculum of G. candidum could be detected in California orchard soils at depths of up to 10 cm. The amount of inoculum in the soil was positively correlated with that on leaf and fruit surfaces of trees growing at a specific site. Moreover, inoculum of G. candidum was detected at different areas of packing lines in seven packinghouses. There were significant differences among the packinghouses evaluated, and these differences could be attributed, in part, to different sanitation practices used. Nitidulid beetles and fruit flies were found to play a role in disease transmission. These insects acquired sour rot inoculum in the orchard, and 25% of nitidulid beetles and 26% of fruit flies collected were positive for the pathogen. Spore survival in the soil over a 12-month period decreased significantly when soil depth increased from 10 to 20 cm. This study identified sources of inoculum of G. candidum in orchards and packinghouses, and provides information to guide development of disease management programs under the semi-arid conditions of California.