Background Prompt diagnosis and effective malaria treatment is a key strategy in malaria control. However, the recommended diagnostic methods, microscopy and rapid diagnostic tests (RDTs), are not supported by robust quality assurance systems in endemic areas. This study compared the performance of routine RDTs and smear microscopy with a simple molecular-based colorimetric loop-mediated isothermal amplification (LAMP) at two different levels of the health care system in a malaria-endemic area of western Kenya. Methods Patients presenting with clinical symptoms of malaria at Rota Dispensary (level 2) and Siaya County Referral Hospital (level 4) were enrolled into the study after obtaining written informed consent. Capillary blood was collected to test for malaria by RDT and microscopy at the dispensary and county hospital, and for preparation of blood smears and dried blood spots (DBS) for expert microscopy and real-time polymerase chain reaction (RT-PCR). Results of the routine diagnostic tests were compared with those of malachite green loop-mediated isothermal amplification (MG-LAMP) performed at the two facilities. Results A total of 264 participants were enrolled into the study. At the dispensary level, the positivity rate by RDT, expert microscopy, MG-LAMP and RT-PCR was 37%, 30%, 44% and 42%, respectively, and 42%, 43%, 57% and 43% at the county hospital. Using RT-PCR as the reference test, the sensitivity of RDT and MG-LAMP was 78.1% (CI 67.5–86.4) and 82.9% (CI 73.0–90.3) at Rota dispensary. At Siaya hospital the sensitivity of routine microscopy and MG-LAMP was 83.3% (CI 65.3–94.4) and 93.3% (CI 77.9–99.2), respectively. Compared to MG-LAMP, there were 14 false positives and 29 false negatives by RDT at Rota dispensary and 3 false positives and 13 false negatives by routine microscopy at Siaya Hospital. Conclusion MG-LAMP is more sensitive than RDTs and microscopy in the detection of malaria parasites at public health facilities and might be a useful quality control tool in resource-limited settings.