The moisture content in subalpine spruce was highest in overstory trees and lowest in understory trees, and it was higher in trees on a moist site than in trees of similar vigor classes on a dry site. Moisture contents of 10% of saturation for the more vigorous trees on the moist site and 7% of saturation for the less vigorous trees on the dry site represented a statistically significant difference which appeared to restrict the development of heartwood fungi to the wetter trees. A similar difference in the moisture content existed between the 1.5-ft. and the 20-ft. level of the trees, the occurrence of fungi being restricted to the wetter basal portion of the stems. In the laboratory, infection did not take place in test blocks at moisture contents lower than 8% of saturation. It is suggested that the threshold moisture content for infection in the trees occurs around the 7 to 8% saturation level. In the laboratory tests a difference in the moisture content of 3.4% of saturation in wood resulted in a statistically significant difference in the rate of decay by Coniophora puteana (Schum. ex Fr.) Karst., but differences in ring frequency and specific gravity in the test pieces corresponding to the differences between these properties in the living trees did not appreciably affect the decay rate. There was no evidence that variations in the distribution of decay-promoting or decay-retarding substances occurred in the trees from the two sites.