Downy mildew in sweet basil (Ocimum basilicum L.) caused by the oomycete pathogen Peronospora belbahrii Thines was first recorded in Israel in 2011. Within one year, the pathogen has spread all over the country, causing devastating economic damage to basil crops. Similar outbreaks were reported in Europe, the USA, and Asia. Seed transmission and seedling trade were suggested as possible explanations for this rapid spread. Here, we show that P. belbahrii can develop systemically in artificially inoculated basil plants in growth chambers. It may reach remote un-inoculated parts of the plant including the axillary buds but not the roots or seeds. To verify whether transmission of the disease occurs via seeds, we harvested seeds from severely infected, field-grown basil plants. Harvests were done in four seasons, from several basil cultivars growing in three locations in Israel. Microscopic examinations revealed external contamination with sporangia of P. belbahrii of untreated seeds, but not of surface-sterilized seeds. Pathogen-specific PCR assays confirmed the occurrence of the pathogen in untreated seeds, but not in surface-sterilized seeds. Contaminated seeds were grown (without disinfection) in pasteurized soil in growth chambers until the four–six leaf stage. None of several thousand plants showed any symptom or sporulation of downy mildew. PCR assays conducted with several hundred plants grown from contaminated seeds proved no latent infection in plants developed from such seeds. The results confirmed that (i) P. belbahrii can spread systemically in basil plants, but does not reach their roots or seeds; (ii) sporangia of P. belbahrii may contaminate the surface, but not the internal parts, of seeds produced by infected basil plants in the field: and (iii) contaminated seeds produce healthy plants, which carry no latent infection. The data suggest that P. belbahrii in Israel is seed-borne, but not seed-transmitted.