To determine the prevalence of substandard drugs in urban (Ulaanbaatar) and rural (selected provinces) areas of Mongolia, samples of 9 common, therapeutically important drugs were collected from randomly selected drug outlets in Ulaanbaatar and 4 rural provinces by "mystery shoppers". Samples were analyzed by visual inspection, registration status, and biochemical analysis. Samples failing to meet all Pharmacopeia quality tests were considered substandard. In the rural provinces, 69 out of 388 samples were substandard, giving an estimated prevalence of substandard drugs of 17.8% (95% CI: 14.1-22.0). There were 85 unregistered samples, giving a prevalence estimate of unregistered drugs of 21.9%. (95% CI: 17.9-26.3). In the urban Ulaanbaatar districts, 112 out of 848 samples were substandard, giving an estimated prevalence of substandard drugs of 13.2% (95% CI: 11.0-15.7). There were 150 unregistered samples, giving a prevalence estimate of unregistered drugs of 17.7% (95% CI: 15.2-20.4). In the rural provinces, 35 out of 85 (41.2%) unregistered samples were substandard; whereas 34 out of 303 (11.2%) registered samples were substandard. (p < 0.0001) In the urban districts, 18 out of 150 (12.0%) unregistered samples were substandard, whereas 94 out of 698 registered were substandard. (13.5%) (p = 0.6). The prevalence of substandard and unregistered drugs is higher in rural provinces. There is a significant association between substandard and unregistered drugs in the provinces but not in the urban districts. The underlying causes for substandard drugs need to be further investigated in order to help formulate strategies to improve pharmacovigilance and the drug supply quality in Mongolia.