digging holes in the grass

 Sure.  First, don't "correct" her.  You are only making her anxious, which can contribute to her wanting to dig, or do other behaviors that are soothing to dogs.  Digging is not something that is easily done away with.  So, because it's unlikely that you will beat her, join her!!

Dogs like to dig in dirt that has been disturbed, so create a sandbox for her.  Hide some biscuits in it, so that she can dig for them (cool game!) and help her find them the first couple of times. At first, you will want to be outdoors with her, not just leave her alone (which is one big reason why dogs start digging in the first place - they're bored even if you don't think they are).   Any time she goes to dig in the wrong spot, gently redirect her to the right spot and giver her lots of encouragement, praise, more buried bones.   Do not have the other dog in the area, as you don't want to encourage fighting over the bones;-)

monterosa

  She gets chastised, obviously.

You cant punish her for digging after she has already done it. She wont learn anything from it.

Even if she has toys in the yard, it doesnt mean she isnt bored.
You can just prevent her from digging by not leaving her out in the yard by herself, and just taking her for a walk on a leash instead.

 A good solution for you could be to build a sand box. Whenever you see her digging in the dirt, walk her over to the sand box and encourage her to dig there. Eventually she will learn where she is allowed to dig, and where she isnt.

 ETA - Spiritdogs beat me to it

monterosa

I don’t think its due to boredom

I will have to disagree, most of the time this happen due to boredom and lack of exercise. By exercise i mean taking her out for a walk. Birds fly, fish swim and dogs walk. A dog needs to be walked every day for 30-45 minutes. If you didnt have a yard this behavior could change into chewing furniture.

Take her for a 45 minute walk and place her in the yard again, you'll see that you will not have a new hole that day. A tired dog is a good dog, you can not trust her to tire herself up because obviously is not happening

Thank you for replying. The sandpit sounds a good idea....what dimensions would you suggest?  She gets walked every day when its not raining. She walks with me to the offfice every morning, and then back. This is at least 30 mins. I can be with her outside for a certain time, but not always.

We live in a sunny climate, so the house is open all the time (although this year has been wetter than usual), so I need to be able to dissuade or re-educate her not to dig, because both dogs wander in and out at will, and even though I work from home in the afternoons, I can't be keeping an eye on her at the same time. The two dogs play wonderfully well together, but even if they're both outside, she'll still dig.

I'll try what you suggest, I just need an idea of size, depth.

Maybe I'm weird, but the solution sounds easy, to me. Don't leave her outside by herself. My dogs would gladly dig to China, left to their own devices, but they're only in the yard when I am, so it doesn't happen.

 If you're going to try the sand pit, just use an area about twice the size of the largest hole she usually digs.  Also, if your climate is sunny, be aware that she may just be digging "cooling spots" and also be sure to provide some shade over the pit area and a bit around it.  You cannot re-educate a dog not to dig - it's genetic with some of them.  Hence, my suggestion to try training her *where* to dig.  But, for training to be successful, you cannot leave her alone outdoors during the training phase.  Every time she digs in a spot other than the pit, she is learning she can.  So, during training, your job is to redirect her every single time she tries to dig elsewhere, and you must do it in a fun way, never in a harsh way.  Remember, your goal is to make that pit the happiest possible place for her to dig!

http://www.siriuspup.com/pop_digging.html