Dampness and visible mold in homes are associated with asthma development, but causal mechanisms remain unclear. The goal of this research was to explore associations among measured dampness, fungal exposure, and childhood asthma development without the bias of culture-based microbial analysis. In the low-income, Latino CHAMACOS birth cohort, house dust was collected at age 12 months, and asthma status was determined at age 7 years. The current analysis included 13 asthma cases and 28 controls. Next-generation DNA sequencing methods quantified fungal taxa and diversity. Lower fungal diversity (number of fungal operational taxonomic units) was significantly associated with increased risk of asthma development: unadjusted odds ratio (OR) 4.80 (95% confidence interval (CI) 1.04–22.1). Control for potential confounders strengthened this relationship. Decreased diversity within the genus Cryptococcus was significantly associated with increased asthma risk (OR 21.0, 95% CI 2.16–204). No fungal taxon (species, genus, class) was significantly positively associated with asthma development, and one was significantly negatively associated. Elevated moisture was associated with increased fungal diversity, and moisture/mold indicators were associated with four fungal taxa. Next-generation DNA sequencing provided comprehensive estimates of fungal identity and diversity, demonstrating significant associations between low fungal diversity and childhood asthma development in this community.