High species diversity in a community may reduce risk of infectious disease, termed the dilution effect. However, the generality of dilution effect in different disease systems remains controversial. Besides host competence, behavior of fish hosts also may play an important role in dilution or amplification of disease. Using the goldfish (Carassius auratus)-Gyrodactylus kobayashii system, effects of host competence and schooling behavior on parasite transmission were investigated while holding focal host density constant. Following competency tests of 12 fish species as potential hosts for the parasite, infection of G. kobayashii was determined on fins of goldfish mixed with each one of three different species based on their level of host competence, including the silver crucian carp, C. auratus gibelio (low competence), the grass carp, Ctenopharyngodon idellus (incompetence), the swordtail Xiphophorus helleri (incompetence), and all four species combined. Compared with mean abundance (85.8 ± 25.1) on goldfish in the control group, there was a significant decrease in the silver crucian carp group (30.0 ± 16.5), but no significant changes in the swordtail group (70.0 ± 22.2), the grass carp group (116.1 ± 33.2), or the multi-species group (75.9 ± 30.8) during the 10-day experiment. The parasite was also found on C. auratus gibelio in the silver crucian carp group and the multi-species group at a mean abundance of 7.1 and 10.9, respectively. Analysis of swimming behavior showed that the goldfish mixed well in schools with the silver crucian carp. However, the goldfish maintained separation from the grass carp and swordtail when mixed together. Distance between goldfish increased, and swimming speed and contact time decreased with the additional fish for all groups. The results suggested that the presence of a low-competence host in sufficient numbers was a necessary condition for a dilution effect due to encounter reduction, and the dilution effect may also be enhanced by changes in schooling behavior of goldfish in the presence of the low competence hosts. However, the presence of incompetent hosts did not result in any dilution effect owing to the specialist nature of the parasites and the lack of mixing with schools of goldfish.