Summary Background Increasing insecticide costs and constrained malaria budgets could make universal vector control strategies, such as indoor residual spraying (IRS), unsustainable in low-transmission settings. We investigated the effectiveness and cost-effectiveness of a reactive, targeted IRS strategy. Methods This cluster-randomised, open-label, non-inferiority trial compared reactive, targeted IRS with standard IRS practice in northeastern South Africa over two malaria seasons (2015–17). In standard IRS clusters, programme managers conducted annual mass spray campaigns prioritising areas using historical data, expert opinion, and other factors. In targeted IRS clusters, only houses of index cases (identified through passive surveillance) and their immediate neighbours were sprayed. The non-inferiority margin was 1 case per 1000 person-years. Health service costs of real-world implementation were modelled from primary and secondary data. Incremental costs per disability-adjusted life-year (DALY) were estimated and deterministic and probabilistic sensitivity analyses conducted. This study is registered with ClinicalTrials.gov, NCT02556242. Findings Malaria incidence was 0·95 per 1000 person-years (95% CI 0·58 to 1·32) in the standard IRS group and 1·05 per 1000 person-years (0·72 to 1·38) in the targeted IRS group, corresponding to a rate difference of 0·10 per 1000 person-years (–0·38 to 0·59), demonstrating non-inferiority for targeted IRS (p