The malaria parasite feeds by degrading haemoglobin in an acidic food vacuole, producing free haem moieties as a by-product. The haem in oxyhaemoglobin is oxidized from the Fe(II) state to the Fe(III) state with the consequent production of an equimolar concentration of H2O2. We have analysed the fate of haem molecules in Plasmodium falciparum-infected erythrocytes and have found that only about one third of the haem is polymerized to form haemozoin. The remainder appears to be degraded by a non-enzymic process which leads to an accumulation of iron in the parasite. A possible route for degradation of the haem is by reacting with H2O2, and we show that, under conditions designed to resemble those found in the food vacuole, i.e., at pH 5.2 in the presence of protein, free haem undergoes rapid peroxidative decomposition. Chloroquine and quinacrine are shown to be efficient inhibitors of the peroxidative destruction of haem, while epiquinine, a quinoline compound with very low antimalarial activity, has little inhibitory effect. We also show that chloroquine enhances the association of haem with membranes, while epiquinine inhibits this association, and that treatment of parasitized erythrocytes with chloroquine leads to a build-up of membrane-associated haem in the parasite. We suggest that chloroquine exerts its antimalarial activity by causing a build-up of toxic membrane-associated haem molecules that eventually destroy the integrity of the malaria parasite. We have further shown that resistance-modulating compounds, such as chlorpromazine, interact with haem and efficiently inhibit its degradation. This may explain the weak antimalarial activities of these compounds.