This study was undertaken to determine which rodent species serve as primary reservoirs for the Lyme disease spirochete Borrelia burgdorferi in commonly occurring woodland types in inland areas of northwestern California, and to examine whether chaparral or grassland serve as source habitats for dispersal of B. burgdorferi- or B. bissettii-infected rodents into adjacent woodlands. The western gray squirrel (Sciurus griseus) was commonly infected with B. burgdorferi in oak woodlands, whereas examination of 30 dusky-footed woodrats (Neotoma fuscipes) and 280 Peromyscus spp. mice from 13 widely-spaced Mendocino County woodlands during 2002 and 2003 yielded only one infected woodrat and one infected deer mouse (P. maniculatus). These data suggest that western gray squirrels account for the majority of production by rodents of fed Ixodes pacificus larvae infected with B. burgdorferi in the woodlands sampled. Infections with B. burgdorferi also were rare in woodrats (0/47, 0/3) and mice (3/66, 1/6) captured in chaparral and grassland, respectively, and therefore these habitats are unlikely sources for dispersal of this spirochete into adjacent woodlands. On the other hand, B. bissettii was commonly detected in both woodrats (22/47) and mice (15/66) in chaparral. We conclude that the data from this and previous studies in northwestern California are suggestive of a pattern where inland oak-woodland habitats harbor a B. burgdorferi transmission cycle driven primarily by I. pacificus and western gray squirrels, whereas chaparral habitats contain a B. bissettii transmission cycle perpetuated largely by I. spinipalpis, woodrats, and Peromyscus mice. The dominant role of western gray squirrels as reservoirs of B. burgdorferi in certain woodlands offers intriguing opportunities for preventing Lyme disease by targeting these animals by means of either host-targeted acaricides or oral vaccination against B. burgdorferi.