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Iron deficiency anaemia is a public health problem in Tanzania especially among children under the age of five years. In malaria holoendemic areas, control of anaemia by supplementation with iron has been reported to increase serious adverse events. The World Health Organization recommends that, programs to control anaemia in such areas should go concurrently with malaria control programmes. The objectives of the study were to: (i) to determine if a supplement providing 2.5 mg of iron as ferric EDTA and 2.5 mg of iron as ferrous lactate (low dose) is as effective in correcting anaemia as a supplement providing the standard 10 mg of iron as ferrous lactate (high dose); and ii) determine if iron supplementation increased the risk of malaria. This study was carried out in Mvomero District of east-central Tanzania. Two groups (69 and 70 subjects per treatment) of moderately anaemic children (7.0–9.1 g of Hb/dl), received one of the two micronutrient supplements differing only in iron content for a period of 60 days. Results showed that, the average haemoglobin (Hb) concentration improved from 8.30±0.60 g/dl to 11.08±1.25 g/dl. The average weight-for-age for all children increased from 16.0 to 20.6% while their weight-for-height increased from 4.0 to 13.3%. The incidence of asymptomatic and symptomatic malaria ranged from 10.0 to 10.4% at all time points with no apparent increase in malaria severity due to iron supplementation. Overall, there was a significant reduction in anaemia during the 60 day supplementation period. This study demonstrated that, micronutrient supplements containing low-dose ferric-EDTA is just as effective as the high dose iron in reducing anaemia and can be safely utilized in malaria holoendemic areas to control iron deficiency anaemia. It is recommended that, a large study should be conducted to affirm the effectiveness of the low-dose ferric-EDTA in controlling iron deficiency anaemia among underfive children.