Formation of Rydberg atoms due to 1 s ! nlm excitations of hydrogen by positron impact, for arbitrary n, l, m, in dense quantum plasma has been investigated using a distorted wave theory which includes screened dipole polarization potential. The interactions among the charged particles in the plasma have been represented by exponential cosine-screened Coulomb potentials. Making use of a simple variationally determined hydrogen wave function, it has been possible to obtain the distorted wave scattering amplitude in a closed analytical form. A detailed study has been made to explore the structure of differential and total cross sections in the energy range 20-300 eV of incident positron. For the unscreened case, our results agree nicely with some of the most accurate results available in the literature. To the best of our knowledge, such a study on the differential and total cross sections for 1 s ! nlm inelastic positron-hydrogen collisions in dense quantum plasma is the first reported in the literature. V C 2014 AIP Publishing LLC.