The behavior of yeasts and molds as influenced by water activity (aw) is reviewed. Fungal spoilage of foods occurs more often than bacterial spoilage at aw 0.61-0.85 not because fungi grow faster at reduced aw but rather because the competitive effects of the vast majority of bacteria are absent. Higher aw is generally required for spore formation than for spore germination. The range of aw permitting germination of spores is greatest at an optimum temperature, but optimum availability of nutrients tends to broaden the range of aw and temperature at which germination and growth will occur. The minimum aw levels for growth of fungi are lower than those required for mycotoxin production. It is imperative that diluents and enumeration media with reduced aw be used to detect xerotolerant fungi in foods. Otherwise, vegetative cells and spores may be killed by osmotic shock or remain dormant when exposed to high aw associated with diluents and media routinely used for mycological analyses.