Although most of the Papua New Guinea highlands are too high for stable malaria transmission, local epidemics are a regular feature of the region. Few detailed descriptions of such epidemics are available, however. We describe the investigation of a malaria epidemic in the Obura Valley, Eastern Highlands Province, Papua New Guinea. Of the 244 samples examined by microscopy, 6.6% were positive for Plasmodium falciparum only, 9.4% were positive for Plasmodium vivax only, and 1.2% were mixed infections. MSP2 and MSP3alpha genotyping and AMA1 sequencing were used to determine the genetic variation present in a sample of P. falciparum and P. vivax infections. The P. vivax infections were found to be genetically highly diverse. In contrast, all P. falciparum samples were of a single genotype. This striking difference in genetic diversity suggests endemic, low-level local transmission for P. vivax but an outside introduction of P. falciparum as the most likely source of the epidemic.