Middle East respiratory syndrome coronavirus (MERS-CoV) is a zoonotic virus originating in camels that has been causing significant mortality and morbidity in humans in the Arabian Peninsula. The epidemiology of the virus remains poorly understood, with hospital outbreaks, isolated cases with known exposure to camels and apparent community transmission occurring simultaneously. While traditional and seroepidemiological studies have been employed extensively throughout the epidemic, viral sequence data have not been utilised to their full potential in understanding transmission patterns within the outbreak. Here we use existing MERS-CoV sequence data to explore the phylodynamics of the virus in two of its known major hosts, humans and camels. We employ structured coalescent models to show that long-term MERS-CoV evolution occurs exclusively in camels, whereas humans act as a transient, and ultimately terminal host. By analysing the distribution of human outbreak cluster sizes and zoonotic introduction times we show that human outbreaks in the Arabian peninsula are driven by seasonally varying zoonotic transfer of viruses from camels. Without heretofore unseen evolution of host tropism, MERS-CoV is unlikely to become endemic in humans.