Sexually reproducing parasites, such as malaria parasites, experience a trade-off between the allocation of resources to asexual replication and the production of sexual forms. Allocation by malaria parasites to sexual forms (the conversion rate) is variable but the evolutionary drivers of this plasticity are poorly understood. We use evolutionary theory for life histories to combine a mathematical model and experiments to reveal that parasites adjust conversion rate according to the dynamics of asexual densities in the blood of the host. Our model predicts the direction of change in conversion rates that returns the greatest fitness after perturbation of asexual densities by different doses of antimalarial drugs. The loss of a high proportion of asexuals is predicted to elicit increased conversion (terminal investment), while smaller losses are managed by reducing conversion (reproductive restraint) to facilitate within-host survival and future transmission. This non-linear pattern of allocation is consistent with adaptive reproductive strategies observed in multicellular organisms. We then empirically estimate conversion rates of the rodent malaria parasite Plasmodium chabaudi in response to the killing of asexual stages by different doses of antimalarial drugs and forecast the short-term fitness consequences of these responses. Our data reveal the predicted non-linear pattern, and this is further supported by analyses of previous experiments that perturb asexual stage densities using drugs or within-host competition, across multiple parasite genotypes. Whilst conversion rates, across all datasets, are most strongly influenced by changes in asexual density, parasites also modulate conversion according to the availability of red blood cell resources. In summary, increasing conversion maximises short-term transmission and reducing conversion facilitates in-host survival and thus, future transmission. Understanding patterns of parasite allocation to reproduction matters because within-host replication is responsible for disease symptoms and between-host transmission determines disease spread.