Malaria at an elevation of 1050 metres is common and highly endemic in the Tagari Valley in the Southern Highlands of Papua New Guinea. Health impact assessments showed that the risks of malaria and epidemic polyarthritis at a gasfield development project in this area were high. Baseline malariometric surveys were conducted in four villages in June and August 1990 and two follow-up surveys (May and December 1991) were made in the village of Nogolitogo near the gasfield pioneer base camp. A total of 941 blood smears were examined. Average malaria prevalence rates decreased with altitude from 56% (at 1050 m) to 9% (at 1700 m) for children 1-9 years of age and from 45% (at 1050 m) to 8% (at 1550 m) for those aged 10 years or more. The spleen rate for children less than 10 years old did not vary significantly with altitude, but average enlarged spleen for all ages decreased with altitude. Mean packed cell volume increased with altitude. Plasmodium falciparum was the most common malaria parasite found and Anopheles punctulatus the predominant vector. Ross River arbovirus (RRV) antibody prevalence was 59%. These results indicate frequent or constant transmission of malaria and pathogenic arboviruses. Entomological and epidemiological data suggested that the vulnerability of the valley community, the receptivity of the environment and the health hazards from malaria and RRV were high. Nonimmune Papua New Guineans and expatriate employees face high health hazards; therefore effective preventive measures are required to mitigate epidemics and avoid the likely heightened transmission of malaria and arboviruses caused by the development project.