Vertically transmitted parasites are transmitted from generation to generation of hosts usually via the host's gametes. Owing to gamete size dimorphism, the major transmission route is transovarial and selection (on the parasite) favours strategies which increase the relative frequency of the transmitting (female) host sex. These strategies impose unusual selection pressures on the host, and coevolution between hosts and vertically transmitted parasites has been implicated in speciation, in the evolution of symbiosis, and in the evolution of novel systems of host reproduction and sex determination. We review the evolutionary implications of vertically transmitted parasites in arthropods before focusing on strategies of transmission of a parasitic sex ratio distorter in Gammarus duebeni. The efficiency of parasite transmission to new hosts is a key factor underlying the relationship between vertically transmitted parasites and their hosts. Vertically transmitted parasites must overcome 2 bottlenecks in order to ensure successful infection of future host generations: first, transmission from adult to gamete; and secondly, transmission to the germ-line of the infected host. We investigate these 2 processes with regard to transovarial transmission by a microsporidian parasite in Gammarus duebeni. Parasite transmission from adult to eggs is highly efficient, with 96% of eggs of infected mothers inheriting the infection, whereas transmission to germ-line within infected embryos is relatively inefficient (72%). We measure parasite distribution between cells of developing embryos, and use these distributions to infer possible mechanisms of parasite transmission to germ-line. Parasite distribution within the embryo is dependent on host cell lineage, and is not consistent with unbiased segregation between daughter cells. These results indicate that parasites segregate together at host cell division, and may reflect a strategy of differential segregation to the host germ-line. We consider alternative parasite strategies at the cell-level in terms of their evolutionary implications.