The researchers, from the University of Arizona, introduced a gene that affected the insect's gut, meaning the malaria parasite could not develop.
They report the advance, which also reduced the insects' lifespan, in the journal PLoS Pathogens.
The ultimate goal is to introduce malaria-resistant mosquitoes into the environment.
"Before we do this, we have to somehow give the mosquitoes a competitive advantage over the disease-carrying insects," explained Professor Michael Riehle from the University of Arizona a principle investigator on the project.
In the study the researchers altered a gene that codes for a "signalling molecule".
This molecule, a protein, enables the mosquito's cells to communicate with each other, and is crucial for parasite development inside the mosquito.
The genetic tweak artificially increased its production, disrupting the whole process, and also shortened the insect's lifespan.
The team was able to add a fluorescent tag to the gene, to ensure that it had been successfully "expressed" by the mosquito larvae.
Professor Riehle said: "This is the first time that we've been able to completely block the parasite from developing in the mosquito."
Gareth Lycett, a malaria researcher from Liverpool School of Tropical Medicine in the UK, said it was an important advance.
"They have tested it on the most harmful of the malaria parasites, Plasmodium falciparum," he told BBC News. "It is another step on the journey towards potentially assisting malaria control through GM mosquito release."
But Dr Lycett pointed out that the this work had not been carried out specifically on the Anopheles gambiae mosquito. "That is the major vector of malaria in Africa where the disease is most prevalent," he explained.
This study was a collaborative project with the University of California Davis and the University of Georgia funded by the National Institutes of Health.
What happens next?
This is a key step in a long genetic battle against a global killer. The ultimate aim is to tackle the root cause of malaria's spread by releasing the parasite-proof mosquitoes into the environment.
For that to be successful, the genetically modified insects would have to "take over" from the naturally occurring, disease-spreading mosquitoes.
This means giving the GM insects a competitive advantage - something that has not yet been achieved. Researchers are investigating a number of genetic "tricks" in pursuit of this.
One of these is to ensure that the gene that blocks the parasite's development is guaranteed to be passed down to the modified mosquitoes' offspring - thereby making sure that the gene eventually spreads throughout the population.
The other is to give the malaria-resistant mosquitoes an additional genetic boost, such as a gene that makes them resistance to toxins that could be used against unmodified mosquitoes.
But there are serious ethical concerns about releasing a genetically modified insect into the environment. Once the science is pinned down, the risks and benefits to the environment, and to human health, will have to be properly assessed.
By Victoria Gill (Science reporter, BBC News)
