Critical to predicting the impact of disease spread is understanding how behaviour of individual parasites influences dynamics at the population scale. In parasites with a free-living stage, the decision to enter a host depends on information obtained from the environment. Assessing host availability and conspecific density is vital to maximizing individual fitness within a host, and subsequently affects population dynamics. We used two species of free-living entomopathogenic nematodes (EPNs) and a caterpillar host. Using soil mesocosms, we tested three competing hypothesis of parasite distribution among hosts: random, even, and aggregated distribution across varying levels of host and parasite densities. Parasite distribution among hosts are critical in determining individual fitness and thus stability of host-parasite dynamics. Overall, we found evidence to support the aggregated distribution hypotheses in both species of EPNs. Aggregation increased with parasite density, but host density had no effect. Aggregation had non-linear consequences on fitness. When too many parasites colonized an individual host, intraspecific competition led to reduced female size. Alternatively, when too few parasites colonized a host, its resources were not effectively exploited, and individual females again showed reduced size. As female size affects fecundity, aggregation behaviour can strongly reduce per capita fecundity, facilitating stabilization of host-parasite dynamics. We are currently examining the magnitude of this effect using mathematical modelling parameterized from this study. Our study thus supports prior work on EPNs which also showed aggregated behavior and extends our understanding by linking this behavior to individual fitness and its impact on population dynamics.