Among pathogenic environmental fungi, spores are thought to be infectious particles that germinate in the host to cause disease. The meningoencephalitis-causing yeast Cryptococcus neoformans is found ubiquitously in the environment and sporulates in response to nutrient limitation. While the yeast form has been studied extensively, relatively little is known about spore biogenesis, and spore germination has never been evaluated at the molecular level. Using genome transcript analysis of spores and molecular genetic approaches, we discovered that trehalose homeostasis plays a key role in regulating sporulation of C. neoformans, is required for full spore viability, and influences virulence. Specifically, we found that genes involved in trehalose metabolism, including a previously uncharacterized secreted trehalase (NTH2), are highly overrepresented in dormant spores. Deletion of the two predicted trehalases in the C. neoformans genome, NTH1 and NTH2, resulted in severe defects in spore production, a decrease in spore germination, and an increase in the production of alternative developmental structures. This shift in cell types suggests that trehalose levels modulate cell fate decisions during sexual development. We also discovered that deletion of the NTH2 trehalase results in hypervirulence in a murine model of infection. Taken together, these data show that the metabolic adaptations that allow this fungus to proliferate ubiquitously in the environment play unexpected roles in virulence in the mammalian host and highlight the complex interplay among the processes of metabolism, development, and pathogenesis.