We assessed the knowledge of malaria diagnosis and management by community health providers in rural Vientiane and Savannakhet Provinces, Lao PDR. Sixty health providers (17 pharmacy owners/drug sellers and 43 village health volunteers) were interviewed. All diagnosed malaria using symptoms and signs only; 14% were aware of >2 criteria for the diagnosis of severe malaria. Although chloroquine and quinine, the then recommended Lao national policy for uncomplicated malaria treatment, were the most common antimalarials prescribed - 65% gave incorrect doses and 70% did not know the side effects. Although not recommended by the then national policy, 27% of the health providers used combinations of antimalarials as they considered monotherapy ineffective. This study strongly suggests that further training of Lao rural health providers in malaria diagnosis and management is needed to improve the quality of health services in areas remote from district hospitals.