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Leaf fungal pathogens alter their host species’ performance and, thus, changes in fungal species composition can translate into effects at the tree community scale. Conversely, the functional diversity of tree species in a host tree’s local neighbourhood can affect the host’s foliar fungal infestation. Therefore, understanding the factors that affect fungal infestations is important to advance our understanding of biodiversity-ecosystem functioning (BEF) relationships. Here we make use of the largest BEF tree experiment worldwide, the BEF-China experiment, where we selected tree host species with different neighbour species. Identifying fungal taxa by microscopy and by high-throughput DNA sequencing techniques based on the internal transcribed spacer (ITS) rDNA region, we analysed the fungal richness and infestation rates of our target trees as a function of local species richness. Based on the visual microscopic assessment, we found that a higher tree diversity reduced fungal richness and host-specific fungal infestation in the host’s local neighbourhood, while molecular fungal richness was unaffected. This diversity effect was mainly explained by the decrease in host proportion. Thus, the dilution of host species in the local neighbourhood was the primary mechanism in reducing the fungal disease severity. Overall, our study suggests that diverse forests will suffer less from foliar fungal diseases compared to those with lower diversity.