Aims:To identify priorities for improving effective use of laboratory services in a district hospital in Malawi.Methods:A prospective observational study of clinician–patient interactions to analyse laboratory test requesting practices and utilisation of laboratory results. The proportion of tests that was appropriately ordered, processed and ultimately influenced clinical management was used to assess effectiveness of utilisation.Results:420 clinical consultations between health professionals and patients were observed. 92% of tests were ordered appropriately, 84% were processed by the laboratory and 64% of results influenced patient management. 73–79% of high-volume tests (haemoglobin, microscopy for malaria and tuberculosis) and 32% of low-volume tests influenced management.Conclusions:25% of commonly requested laboratory tests were not utilised effectively; because of the high volume, interventions to improve their use are likely to be cost effective. Although 68% of low-volume tests were not used efficiently, the cost of providing support for these tests in a resource-poor setting needs to be balanced against their clinical usefulness. In contrast to published information, this study shows significant under-requesting of laboratory tests that were available. Measures to increase appropriate test requests will have implications for clinician education as well as laboratory space, budgets and staffing levels.