The organophosphorus insecticide malathion has been used in insecticide-diffusing substrata (IDS) to reduce aquatic insect colonization and grazing activity, thereby facilitating study of stream ecosystem function. Although there has been some concern that malathion may provide a source of P, previous investigators have assumed that malathion has no direct inhibitory effect on algae. In a seasonal study of 12 New Zealand streams, malathion exposure frequently caused significant decreases in algal biomass accrual. Inhibition of algal biomass accrual by malathion was more severe under conditions of enhanced nutrient supply. Malathion exposure also substantially reduced insect densities. However, statistically significant invertebrate responses to malathion exposure were uncommon because of high variability of insect densities on IDS. These results suggest that 1) direct inhibition of algal biomass accrual by malathion in IDS should not be discounted, and 2) malathion-induced reductions in insect density and grazing pressure on IDS may be spatially variable and difficult to detect without extensive replication.