ABSTRACT: BACKGROUND: Current Uganda National Malaria treatment guidelines recommend parasitological confirmation either by microscopy or rapid diagnostic test (RDT) before treatment with artemether-lumefantrine (AL). However, the cost-effectiveness of these strategies has not been assessed at rural operational primary care centres. METHODS: Three health centres (HCs) were randomized to three diagnostic arms (microscopy, RDT and presumptive diagnosis) in a district of low and another of high malaria transmission intensities in Uganda. Some 22,052 patients presenting with fever at outpatients departments were enrolled from March 2010 to February 2011. Of these, a random sample of 1,627 was selected to measure additional socio-economic characteristics. Costing was performed following the standard step-down cost allocation and the ingredients approach. Effectiveness was measured as the number and proportion of patients correctly diagnosed and treated. Incremental Cost-Effectiveness Ratios (ICERs) were estimated from the societal perspective (Clinicaltrials.gov, NCT00565071). RESULTS: Overall RDT was most cost-effective with lowest ICER US$5.0 compared to microscopy US$9.61 per case correctly diagnosed and treated. In the high transmission setting, ICER was US$4.38 for RDT and US$12.98 for microscopy. The corresponding ICERs in the low transmission setting were US$5.85 and US$7.63 respectively. The difference in ICERs between RDT and microscopy was greater in the high transmission area (US$8.9) than in low transmission setting (US$1.78). At a willingness to pay of US$2.8, RDT remained cost effective up to a threshold value of the cost of treatment of US$4.7. CONCLUSION: RDT was cost effective in both low and high transmission settings. With a global campaign to reduce the costs of AL and RDT, the Malaria Control Programme and stakeholders need a strategy for malaria diagnosis because as the cost of AL decreases, presumptive treatment is likely to become more attractive.