Researchers who looked at 1,500 samples of seven malaria drugs from seven countries in South East Asia say poor-quality and fake tablets are causing drug resistance and treatment failure.
Data from 21 countries in sub-Saharan Africa including over 2,500 drug samples showed similar results.
Experts say  
          The Lancet Infectious Diseases
 research is a "wake-up call".
The US researchers from the Fogarty International Center at the National Institutes of Health who carried out the work believe the problem may even be much greater than data suggests.
"Most cases are probably unreported, reported to the wrong agencies, or kept confidential by pharmaceutical companies," say the researchers.
No large studies of drug quality have been carried out in China or India - countries that house a third of the world's population and are a "probable" source of many counterfeit drugs as well as genuine antimalarial medicines, they say.
Lead researcher Gaurvika Nayyar stressed that 3.3 billion people were at risk of malaria, which is classified as endemic in 106 countries.
"Between 655,000 and 1.2 million people die every year from Plasmodium falciparum infection," he said.
"Much of this morbidity and mortality could be avoided if drugs available to patients were efficacious, high quality, and used correctly."
In parts of the world where malaria is prevalent, antimalarial drugs are widely distributed and self-prescribed, both correctly and incorrectly, say the researchers.
The study found there are insufficient facilities to monitor the quality of antimalarial drugs and poor consumer and health-worker knowledge about the therapies.
And there is a lack of regulatory oversight of manufacturing and little punitive action for counterfeiters.
Despite this, malaria mortality rates have fallen by more than 25% globally since 2000, and by 33% in the WHO African Region.
But the World Health Organization says maintaining current rates of progress will not be enough to meet global targets for malaria control.
It is calling for renewed investment in diagnostic testing, treatment, and surveillance for malaria.

The raiders drove into the Metro Bank branch at Babbage Gate, Oakgrove in Milton Keynes at 04:20 BST, police said.
The cash machine was put in a dark 4x4, and the thieves drove off in that vehicle and a white VW Golf.
Police are appealing for anyone with mobile phone footage of the raid to get in touch.
Ray Cardy, who walked past the bank shortly after the raid, said: "The dumper truck had been driven through the front doors, turned round and smashed the ATM from behind.
"The remains of it were on the footpath - the dumper's engine was still running."
A Metro Bank spokeswoman declined to reveal how much money had been taken.

Miss Beckford, who came to the UK from Jamaica aged 17, was also a prominent race equality campaigner.
Marvin Rees said he was "very sad" to hear the news and hers was "a life very well lived".
The former midwife, who was the first black recipient of an MBE in the South West, died at a care home in Bristol earlier this week.
She helped set up the St Pauls Carnival in 1967, was appointed the first Race Relations Officer in Bristol and also worked alongside the bus boycott campaigner Paul Stephenson, to improve racial equality in the city.
Councillor Asher Craig announced Miss Beckford's death and told Bristol24/7: "She was a beautiful woman and had a heart of gold.
"She was extremely stylish and was an amazing networker who had all the skills and expertise of a socialite, which she capitalised on in her role as the entertainments officer on the board of St Paul's Carnival.
"The legacy of Carmen Beckford's contribution towards helping to create a more equal and integrated city must never be forgotten and I will ensure that it lives on."
Miss Beckford is one of "seven saints of St Pauls" who will be commemorated in giant murals, due to be painted by artist Michele Curtis this summer.
The portraits of prominent black Bristolians will be painted on houses or prominent buildings along the route of the St Pauls carnival procession.
A third of malaria drugs used around the world to stem the spread of the disease are counterfeit, data suggests.
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Four balaclava-clad men smashed a dumper truck into the front of a bank and escaped with its cash machine.
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The mayor of Bristol has led tributes to Carmen Beckford, the founder of St Pauls Carnival, who has died aged 87.