We report near-infrared and optical follow-up observations of the afterglow of the Gamma-Ray Burst 000418 starting 2.5 days after the occurrence of the burst and extending over nearly seven weeks. GRB 000418 represents the second case for which the afterglow was initially identified by observations in the near-infrared. During the first 10 days its R-band afterglow was well characterized by a single power-law decay with a slope of 0.86. However, at later times the temporal evolution of the afterglow flattens with respect to a simple power-law decay. Attributing this to an underlying host galaxy we find its magnitude to be R=23.9 and an intrinsic afterglow decay slope of 1.22. The afterglow was very red with R-K=4 mag. The observations can be explained by an adiabatic, spherical fireball solution and a heavy reddening due to dust extinction in the host galaxy. This supports the picture that (long) bursts are associated with events in star-forming regions.