The frequency of opportunities for transmission is key to the severity of directly transmitted disease outbreaks in multihost communities. Transmission opportunities for generalist microparasites often arise from competitive and trophic interactions. Additionally, contact heterogeneities within and between species either hinder or promote transmission. General theory incorporating competition and contact heterogeneities for disease-diversity relationships is underdeveloped. Here, we present a formal framework to explore disease-diversity relationships for directly transmitted parasites that infect multiple host species, including influenza viruses, rabies virus, distemper viruses, and hantaviruses. We explicitly include host regulation via intra- and interspecific competition, where the latter can be dependent on or independent of interspecific contact rates (covering resource utilization overlap, habitat selection preferences, and temporal niche partitioning). We examine how these factors interact with frequency- and density-dependent transmission along with traits of the hosts in the assemblage, culminating in the derivation of a relationship describing the propensity for parasite fitness to decrease in species assemblages relative to that in single-host species. This relationship reveals that increases in biodiversity do not necessarily suppress frequency-dependent parasite transmission and that regulation of hosts via interspecific competition does not always lead to a reduction in parasite fitness. Our approach explicitly shows that species identity and ecological interactions between hosts together determine microparasite transmission outcomes in multispecies communities.