Malaria is a major public health problem particularly in rural Sub-Saharan Africa. In most urban areas, malaria transmission intensity is low thus monitoring trends using reliable tools is crucial to provide vital information for future management of the disease. Rapid diagnostic tests (RDT) such as Paracheck Pf are now increasingly adopted for Plasmodium falciparum malaria diagnosis and are advantageous and cost effective alternative to microscopy. This cross sectional survey was carried out during June 2005 to determine the prevalence of malaria in an urban setting and compare microscopy diagnosis versus Paracheck Pf for detecting Plasmodium falciparum. Blood samples from a total of 301 children (< 10 years) attending outpatient clinic at Makorora Health Centre, in Tanga, Tanzania were examined for the presence of malaria. Twenty-nine (9.6%) of the children were positive to malaria by microscopy while 30 (10.0%) were positive by Paracheck test. Three out of 30 positive cases detected by Paracheck were negative by microscopy; thus considered to be false positive results. For the 271 Paracheck Pf negative cases, 2 were positive by microscopy; yielding 2 false negative results. Paracheck Pf sensitivity and specificity were 93.1% and 98.9%, respectively. P. falciparum was the only malarial species observed among the 29 microscopy positive cases. The prevalence of anaemia among the children was 53.16%. These findings indicate a low prevalence of malaria in Tanga City and that Paracheck Pf can be an effective tool for malaria diagnosis.