BACKGROUND: The diagnosis and treatment of malaria is often based on syndromic presentation (presumptive treatment) and microscopic examination of blood films. Treatment based on syndromic approach has been found to be costly, and contributes to the development of drug resistance, while microscopic diagnosis of malaria is time-consuming and labour-intensive. Also, there is lack of trained microscopists and reliable equipment especially in rural areas of Nigeria. However, although rapid diagnostic tests (RDTs) have improved the ease of appropriate diagnosis of malaria diagnosis, the cost-effectiveness of RDTs in case management of malaria has not been evaluated in Nigeria. The study hence compares the cost-effectiveness of RDT versus syndromic diagnosis and microscopy. METHODS: A total of 638 patients with fever, clinically diagnosed as malaria (presumptive malaria) by health workers, were selected for examination with both RDT and microscopy. Patients positive on RDT received artemisinin-based combination therapy (ACT) and febrile patients negative on RDT received an antibiotic treatment. Using a decision tree model for a hypothetical cohort of 100,000 patients, the diagnostic alternatives considered were presumptive treatment (base strategy), RDT and microscopy. Costs were based on a consumer and provider perspective while the outcome measure was deaths averted. Information on costs and malaria epidemiology were locally generated, and along with available data on effectiveness of diagnostic tests, adherence level to drugs for treatment, and drug efficacy levels, cost-effectiveness estimates were computed using TreeAge programme. Results were reported based on costs and effects per strategy, and incremental cost-effectiveness ratios. RESULTS: The cost-effectiveness analysis at 43.1% prevalence level showed an incremental cost effectiveness ratio (ICER) of 221 per deaths averted between RDT and presumptive treatment, while microscopy is dominated at that level. There was also a lesser cost of RDT ($0.34 million) compared to presumptive treatment ($0.37 million) and microscopy ($0.39 million), with effectiveness values of 99,862, 99,735 and 99,851 for RDT, presumptive treatment and microscopy, respectively. Cost-effectiveness was affected by malaria prevalence level, ACT adherence level, cost of ACT, proportion of non-malaria febrile illness cases that were bacterial, and microscopy and RDT sensitivity. CONCLUSION: RDT is cost-effective when compared to other diagnostic strategies for malaria treatment at malaria prevalence of 43.1% and, therefore, a very good strategy for diagnosis of malaria in Nigeria. There is opportunity for cost savings if rapid diagnostic tests are introduced in health facilities in Nigeria for case management of malaria.