The zoonotic malaria species Plasmodium knowlesi has become the main cause of human malaria in Malaysian Borneo. Deforestation and associated environmental and population changes have been hypothesized as main drivers of this apparent emergence. We gathered village-level data for P. knowlesi incidence for the districts of Kudat and Kota Marudu in Sabah state, Malaysia, for 2008–2012. We adjusted malaria records from routine reporting systems to reflect the diagnostic uncertainty of microscopy for P. knowlesi. We also developed negative binomial spatial autoregressive models to assess potential associations between P. knowlesi incidence and environmental variables derived from satellite-based remote-sensing data. Marked spatial heterogeneity in P. knowlesi incidence was observed, and village-level numbers of P. knowlesi cases were positively associated with forest cover and historical forest loss in surrounding areas. These results suggest the likelihood that deforestation and associated environmental changes are key drivers in P. knowlesi transmission in these areas.