Following the departure of Louis Page to manager Newport County, Yeovil started the 1935/36 season with a new manager - centre-forward David Halliday, who moved West from (Clapton) Orient.

Halliday's first season in charge proved a disaster: Yeovil finished seventh of nine in the Western Section of the Southern League, bottom of the Central Division and departed in the First Round of the Southern League Cup after losing 3-0 at Plymouth Argyle Reserves. Earlier in the season, Yeovil had been involved in the 1934/35 Championship play-off with Eastern Section winners Norwich City Reserves. After a 2-2 draw at Huish Yeovil crashed 7-2 at Carrow Road in the second leg.

Further disappointment came in the FA. Cup. After a 2-1 win at home to Barry Town in the 4th Qualifying Round, Yeovil crashed out of the competition at the hands of amateurs Newport (Isle of Wight). The only thing of note about the game was the fact that Yeovil forced 26 corners without finding a way of wiping out the one goal scored by the Islanders.

During the 1935-36 season, steps were taken to reform the Southern League. One of the leading negotiators being Bill Farthing, The Yeovil Chairman and a member of the League Management Committee.

At a special general meeting in December 1935, it was agreed to form a competition to cover the whole Southern League area with a mid-week section for those clubs needing extra fixtures.

Four clubs dropped out of the league prior to the 1936-37 campaign, however, new boys Ipswich Town created considerable interest. Their opening game of the season against Tunbridge Wells was watched by a crowd of 14,211 and the Christmas games against local rivals Norwich City Reserves, attracted over 25,000 spectators. In mid-April, before a crowd of 10,238 at Portman Road, they clinched the title by beating Yeovil 3-0.

Yeovil went out in the Second Round of the Southern League Cup, defeating Exeter City Reserves 4-1 in the First Round and losing 6-1 at home to Torquay United Reserves in the Second.

Once again it was the FA. Cup that brought most success and publicity to the Club. Results:

The achievement in forcing a 1-1 draw at Walsall in the Second Round was an amazing performance and hopes were high that Yeovil would reach the Third Round again and a home match against Barnsley. In the replay, Yeovil dominated the play but disaster overtook them in the last minute, when Walsall scored the only goal of the match.

The ups and downs of Cup Football saw Yeovil lose 4-1 to Glastonbury in the final of the Somerset Professional Cup later in the season!!

The season ended with a friendly against Arsenal, who won by 7-3 and Yeovil had taken a step forward to regain former glories in a season in which they found it difficult to keep their heads above water financially.