At a time when Bhutan is on the verge of malaria elimination, the aim of this study was to identify malaria clusters at high geographical resolution and to determine its association with local environmental characteristics. Malaria cases from 2006-2014 were obtained from the Vector-borne Disease Control Program under the Ministry of Health, Bhutan. A Zero-Inflated Poisson multivariable regression model with a conditional autoregressive (CAR) prior structure was developed. Bayesian Markov chain Monte Carlo (MCMC) simulation with Gibbs sampling was used to estimate posterior parameters. A total of 2,062 Plasmodium falciparum and 2,284 Plasmodium vivax cases were reported during the study period. Both species of malaria showed seasonal peaks with decreasing trend. Gender and age were not associated with the transmission of either species of malaria. P. falciparum increased by 0.7% (95% CrI: 0.3%, 0.9%) for a one mm increase in rainfall, while climatic variables (temperature and rainfall) were not associated with P. vivax. Insecticide treated bed net use and residual indoor insecticide coverage were unaccounted for in this study. Hot spots and clusters of both species were isolated in the central southern part of Bhutan bordering India. There was significant residual spatial clustering after accounting for climate and demographic variables.