This study develops a methodology to analyse thecost-effectiveness of microscopy and dipstick in diagnosisof malaria in Sri Lanka, in both public and privateprovider, and patient perspectives. The study covers all the public and private healthfacilities and the patients attending these services in SriLanka. The cost of microscopy and dipstick is determined forthe provider and to the patient with the help of malariacontrol cost models developed by Kaewsonthi and others(1996). For the determination of effectiveness of microscopyand dipstick four indicators, i.e.accuracy, percentage ofon-site diagnosis, percentage of accurate on-site diagnosis,and coverage were used. The primary and secondary data areused to determine costs and effectiveness of microscopy anddipstick and these data are obtained from surveys, existingrecords, previous research findings, questionnaires andinterviews. The methodology has been simulated by using actual andestimated data The results of the study does not give theexact value for the cost-effectiveness, but it shows thegeneral trend of cost-effectiveness of microscopy anddipstick. The results show that when the accuracy ofmicroscopy and dipstick is the same, microscopy is morecost-effective both in public and private providerperspective, except for percentage of on-site diagnosis andpercentage of accurate on-site diagnosis in private sector.The cost-effectiveness of microscopy decreases with thedecreasing accuracy of microscopy. Furthermore, dipstickwill be more cost-effective at the low unit cost of dipstick(Rs.17 or lower) and at lower level of blood slides (22 orlower), and also there is a little difference of the unitcost of providing microscopic diagnosis at the point ofservice or not at the point of service. The analysis of treatment seeking pattern of malariacases shows that 26% of malaria cases visit private healthservices mainly because of perceived quality of privatehealth services. The patients incur Rs. 267 per patient pervisit at private health facilities prior to attending apublic health facility. Therefore, it is recommended to consider extension ofon-site diagnostic facilities for malaria to the field byintroducing dipstick at the institutions where there arelower than 22 blood slides are collected, and to retainmicroscopy at the other institutions. The consideration ofprivate sector as an integral part of the National malariaControl Programme, and the provision of dipstick to theprivate sector at a subsidized price are also recommended. In addition, the use of dipstick can improve theefficient use of scarce resources, good quality of care andequity. It also involves private sector in using diagnosticfacilities for malaria that improves private provision andprivate financing. Therefore, use of dipstick will help toachieve the objectives of health care financing reform too.