Avian malaria parasites (Plasmodium) occur commonly in wild birds and are an increasingly popular model system for understanding host–parasite co-evolution. However, whether these parasites have fitness consequences for hosts in endemic areas is much debated, particularly since wild-caught individuals almost always harbour chronic infections of very low parasite density. We used the anti-malarial drug MalaroneTM to test experimentally for fitness effects of chronic malaria infection in a wild population of breeding blue tits (Cyanistes caeruleus). Medication caused a pronounced reduction in Plasmodium infection intensity, usually resulting in complete clearance of these parasites from the blood, as revealed by quantitative PCR. Positive effects of medication on malaria-infected birds were found at multiple stages during breeding, with medicated females showing higher hatching success, provisioning rates and fledging success compared to controls. Most strikingly, we found that treatment of maternal malaria infections strongly altered within-family differences, with reduced inequality in hatching probability and fledging mass within broods reared by medicated females. These within-brood effects appear to explain higher fledging success among medicated females and are consistent with a model of parental optimism in which smaller (marginal) offspring can be successfully raised to independence if additional resources become available during the breeding attempt. Overall, these results demonstrate that chronic avian malaria infections, far from being benign, can have significant effects on host fitness and may thus constitute an important selection pressure in wild bird populations.