Because of instability in eastern Afghanistan, new refugees crossed into the federally administered tribal areas of northwestern Pakistan in 2002. In 2003, we investigated an epidemic of Plasmodium falciparum malaria in 1 of the camps. Incidence was 100.4 cases/1,000 person-years; in other nearby camps it was only 2.1/1,000 person-years. Anopheline mosquitoes were found despite an earlier spray campaign. Documented clinical failures at the basic health unit prompted a drug resistance survey of locally manufactured sulfadoxine-pyrimethamine used for routine treatment. The in vivo failure rate was 28.5%. PCR analysis of the P. falciparum dihydrofolate reductase and dihyropteroate synthase genes showed no mutations associated with clinical failure. However, chemical analysis of the drug showed that it was substandard. As global incidence decreases and epidemics become more of a threat, enhanced quality assurance of control interventions is essential.