Ongoing Cryptococcus gattii outbreaks in the Western United States and Canada illustrate the impact of environmental reservoirs and both clonal and recombining propagation in driving emergence and expansion of microbial pathogens. C. gattii comprises four distinct molecular types: VGI, VGII, VGIII, and VGIV, with no evidence of nuclear genetic exchange, indicating these represent distinct species. C. gattii VGII isolates are causing the Pacific Northwest outbreak, whereas VGIII isolates frequently infect HIV/AIDS patients in Southern California. VGI, VGII, and VGIII have been isolated from patients and animals in the Western US, suggesting these molecular types occur in the environment. However, only two environmental isolates of C. gattii have ever been reported from California: CBS7750 (VGII) and WM161 (VGIII). The incongruence of frequent clinical presence and uncommon environmental isolation suggests an unknown C. gattii reservoir in California. Here we report frequent isolation of C. gattii VGIII MATα and MATa isolates and infrequent isolation of VGI MATα from environmental sources in Southern California. VGIII isolates were obtained from soil debris associated with tree species not previously reported as hosts from sites near residences of infected patients. These isolates are fertile under laboratory conditions, produce abundant spores, and are part of both locally and more distantly recombining populations. MLST and whole genome sequence analysis provide compelling evidence that these environmental isolates are the source of human infections. Isolates displayed wide-ranging virulence in macrophage and animal models. When clinical and environmental isolates with indistinguishable MLST profiles were compared, environmental isolates were less virulent. Taken together, our studies reveal an environmental source and risk of C. gattii to HIV/AIDS patients with implications for the >1,000,000 cryptococcal infections occurring annually for which the causative isolate is rarely assigned species status. Thus, the C. gattii global health burden could be more substantial than currently appreciated.