We present the quantum theory of a Stern-Gerlach system in contact with a linearly dissipative environment at an arbitrary temperature. The dynamics of the reduced density matrix of the system is calculated using the path integral technique, under a general condition when the system and its environment may not be decoupled initially. We analyze the behavior of the density matrix in the long-time limit and compute the time scales of decay of the elements off-diagonal in the coordinate and the momentum space, for the cases of high temperature, zero temperature, and intermediate temperature baths. © 2000 The American Physical Society.