If their theory proves correct, it could lead to the production of a new generation of drugs to treat a disease which kills a few thousand people each day around the world.
The Chinese have used the plant extracts, known as artemisinins, for hundreds if not thousands of years.
Known in China as Quingao and in the West as Sweet Wormwood or Sweet Annie, Artemisia is mentioned in Chinese texts dating from the fourth century as a treatment for fevers.
In the early 1970s, Chinese scientists developed a compound made from the extracts which helps treat malaria. Since then, artemisinins have been used widely to fight the disease.
However, no one is quite sure how they work.
Until now, the accepted theory was that they interact with haem molecules, which are produced when the malaria parasite feeds on red blood cells.
But researchers at St George's Hospital Medical School in London say the extracts actually interact with an enzyme called PfATP6, which occurs naturally in the body.
PfATP6 regulates the level of calcium in the body by pumping it out of cells. If the pump stops working, calcium levels rise and the cells die.
"So far there is no evidence at all of any clinical resistance to artemisinins. It's one of our best hopes for the future and frankly I don't think we have many other options at the moment."
--Research head Dr. Sanjeev Krishna
The London researchers say artemisinins work because they block the action of PfATP6 in the cells of the malaria parasite.
"Artemisinins stop the pump working in parasitic cells and therefore the cells die," said Sanjeev Krishna, head of the research team. "However, they don't block the pump in other non-parasitical cells, which can carry on working as normal."
Krishna said he hopes the research will lead to the production of synthetic artemisinins which are even more effective in blocking PfATP6 than natural artemisinins.
"We've made a good start. Let's see if we can take this further," he said. "I'd certainly be talking to chemists about the possibility of making synthetic artemisinins."
Artemisinins have the added bonus that they have few known side effects and -- as yet -- are impervious to resistance.
"So far there is no evidence at all of any clinical resistance to artemisinins," Krishna said. "It's one of our best hopes for the future and frankly I don't think we have many other options at the moment."