To assess the impact of irrigation canals on malaria transmission, a study was conducted in Dhenkanal district of Orissa, India. The district is situated in the central part of Orissa and hyperendemic area for malaria. A canal system is being constructed for irrigation in the district, which passes through Parjang and Analabereni Primary Health Centres (PHC), endemic for malaria. The water has been released only up to Parjang (Canal with water -CWW) area during the end of 2004 and construction work is still going on in Analabereni PHC (Canal under construction-CUC). Retrospective clinical data (2001-2008) collected from health services from two study sites showed average Slide Positivity Rate (SPR) before release of water (2001-2004) was 9.25% and 18.04% in CWW and CUC areas, respectively. After release of water (2005-2008) the SPR was 5.77% and 10.19%, in CWW and CUC areas, respectively. The average Annual Parasite Incidence (API) was 7.66 and 22.67 in CWW and CUC areas before the release of water and 5.32 and 12.28 after release of water, respectively. A point fever survey was conducted in 2009 which revealed the presence of Plasmodium falciparum (Pf) and P. vivax (Pv) in both study areas. The survey found SPR of 18.82% and 24.54%, and Pf percentages of 75% and 85%, in CWW and CUC areas, respectively. The present study revealed the presence of two malaria vectors, Anopheles culicifacies and Anopheles annularis in the area. Vector Per Man Hour Density was 2.38 in CWW and 2.69 in CUC for An. culicifacies and 1.46 and 1.54 for An. annularis respectively. The sporozoites rates were found to be 3.6 and 3.8 for CWW and CUC, respectively. The present study reveals that, the construction of canal system did not increase the malaria prevalence during post water release period - implying that the malaria control programme was effective although still more intensive situation specific vectors control programme need to be continued simultaneously so that malaria transmission can be curtailed.