The biological larvicide Bacillus thuringiensis var. israelensis (Bti) is used worldwide to control reproduction of mosquitoes in freshwater habitats. However, its impact on the ecosystem including nontarget species is often unclear. In addition, it is unknown how Bti larvicide may interact with local mosquito predators to shape oviposition site selection of mosquitoes. We used an outdoor mesocosm experiment to investigate the effects of realistic concentrations of the bio‐larvicide Bti on Culex oviposition, larval density, survivorship, and on densities of nontarget species. We also manipulated the complexity of the community by manipulating the presence of dragonfly larvae as a predator. Culex oviposition was unaffected by Bti but the larvicide effectively reduced larval density and survivorship in all treatments. Bti did not affect nontarget insects but stimulated phytoplankton density at the expense of lower herbivore density. The presence of dragonfly larvae in mesocosms did not reduce Culex oviposition or larval sensitivity to Bti. We conclude that Bti may effectively reduce the density and survivorship of Culex quinquefasciatus mosquitoes in this part of East Africa, but possibly at the cost of higher phytoplankton densities. Bti‐treated mesocosms were not more or less attractive for mosquitoes, suggesting that its application would not alter their oviposition behavior in the field.