The rediscovery of grey leaf spot (caused by Stemphylium spp.) in narrow-leafed lupins (Lupinus angustifolius L.) in Western Australia in 2007 and identification of susceptible cultivars raised concern about potential impact of this disease in crop production. This study assessed potential yield loss in narrow-leafed lupins and the importance of inoculum source in the development of the disease. In two field experiments, no disease was observed in the resistant cultivar Mandelup, but disease progress was rapid in susceptible genotypes Unicrop and WALAN2333 and resulted in up to 64% yield loss. Disease progress and yield loss were greater in plots inoculated with infested trash than in those with spray-only inoculum. Release of Stemphylium spores from infested trash was monitored during the lupin-growing period by using spore traps and seedling trap plants. Conidia were released continuously throughout the growing period and significant (P < 0.01) correlation was found between the number of conidia captured and the frequency of rain, and between disease severity on trap plants and aerial concentration of conidia. The results confirm that grey leaf spot can severely reduce yield of susceptible narrow-leafed lupin cultivars and that removal or avoidance of previous season trash will be important in preventing spread of the disease.