Bti is a natural, biological enemy of mosquito larvae, that's safe for humans and all creatures except for fungus gnats, black flies, and a few very closely related insects. First discovered in 1976 in Israel, it produces a substance that's fatal to the larvae when they eat it.
For comparisons of several popular Bti products, including Summit Mosquito Dunks and Mosquito Bits, visit the review page.
Bti stands for Bacillus thuringiensis israelensis. If you're a gardener, you might recognize the first part of that name, or the abbreviation Bt.
Regular Bt has been used for years as a natural control for garden caterpillars, but the subspecies Bt israelensis was discovered to be fatal to mosquitoes in particular.
Only Poisonous in Mosquito Larvae Midgut
Scientists Goldberg and Margalit isolated Bti from dead mosquito larvae in a riverbed in Israel in 1976. They published their findings in 1977, and scientists subsequently isolated several other closely related strains of the same israelensis subspecies.
Bti releases crystals which are toxic when mosquito larvae ingest them. The combination of an alkaline environment and the enzymes in the midgut release the crystal's toxins, which eventually cause cells in the larvae's gut to rupture, killing it in four to 24 hours.
Bti is safe for humans and other animals, because they don't have the same combination of an alkali gut and the specific enzymes necessary. The only creatures which have the right combination, besides mosquitoes, are black flies, fungus gnats and a few types of midges.  That's why it's considered one of the safest natural mosquito pesticides on the market.
Besides being non-toxic to humans and other animals, Bti has the advantage that it degrades quickly and doesn't persist in the environment, so even mosquitoes are unlikely to build up a resistance to it. One study showed that the commercial formulation might persist in leaf litter after being sprayed, and this may mean that future generations of mosquitoes may be exposed to it longer and possibly become resistant to it eventually. The few reports of resistance have either occurred under artificially high selective pressure in a laboratory, or are unconfirmed and rare in the wild. But after many years of use so far, and even more decades of Bt use for caterpillars, resistance has not been a problem.
The best time to apply Bti is when the weather warms in spring and you notice adult mosquitoes, since they'll soon begin laying eggs. It acts more slowly in cold water, since larvae are less active and won't eat it as fast, but it will still eliminate them within a few days.  However, you need to start early, because once the larvae have become pupae, they're safe from Bti, even if they're still in the water, since they don't eat during the pupa stage. The larvae look like tiny caterpillars which wriggle in the water, while pupae are comma-shaped, with a larger "head" and a curved "tail."
Mosquitoes keep producing more generations all summer, so the war on larvae doesn't end until cool weather in the fall. Many dunks are formulated to last about a month, though some need replaced every one to two weeks, making them more expensive, and bits work differently. See the review page for more information.
The EPA first registered Bti in 1983 and Bacillus sphaericus, similar but less well-known, in 1991. They have both been thoroughly tested and have been found safe for humans and all wildlife other than mosquitoes, black flies and midges, according to the EPA.
Integrated Pest Management
You may want to use Bti along with other control methods, depending on your specific circumstances. It kills larvae, but it's usually not enough to get rid of all the adult mosquitoes in an area. Since they grow quickly, in a week or less, some may manage to go through the larval stage before or after the Bti is applied. Also, even Bti won't necessarily eliminate every larva, especially if their breeding area is a large marsh, or inaccessible to treatment, such as tiny scattered puddles, trash or treeholes. It's also less effective at eradicating mosquito larvae in water with a lot of organic matter or pollution, such as swamps, brackish ditches or cesspools. 
Then there's the problem of mosquitoes from elsewhere. Adults of some species may fly for miles looking for blood, even if you could eliminate all the ones that hatched nearby.
Treating stagnant water or pools with Bti will definitely decrease the number of mosquito larvae, and therefore the number of adults, but you may still need to use traps, repellants or other control methods to prevent all the biting adults in an area.
Because Bti also kills fungus gnats, it has been formulated into the insecticide Gnatrol WDG, which greenhouse and houseplant owners buy to mix with soil and kill gnat larvae. Five-star reviewers rave about Bti's effectiveness at killing gnats too. Though if you have a fungus gnat problem, you might want to read the one-star and two-star reviews there, before choosing where to purchase Gnatrol.
A substance with a similar effect, Bacillus sphaericus, was isolated from mosquito larvae in California in 1964. Though Bs is also a naturally occurring bacteria that kills the larvae, it acts in a different way. It kills more slowly, typically taking two to three days instead of less than a day, but it can last longer, thus eradicating more than one generation of larvae.
Like Bti, it is only activated in the gut of mosquitoes, but it's not as effective for all kinds of mosquitoes. Culex and Anopheles larvae are most susceptible, while Aedes are less susceptible. There's also a higher chance that mosquitoes may build up resistance to it, and resistance has already been reported in some areas, though scientists are already working on ways of preventing the problem.  For these reasons, Bti currently remains the most popular biological control.
 Larvicides and Larvidicing, Mosquito Information Website, Florida Medical Entomology Laboratory.
 Morris Mosquito Extermination Commission, Morris, New Jersey.
 The Insect Pathogen Bacillus thuringiensis
 Bacterial Larvicides and Larvicides and Larviciding, Mosquito Information Website, Florida Medical Entomology Laboratory.
Bt collection photo by Scott Bauer courtesy of the USDA. Larvae photo from Agencia Brasil, Wikimedia Commons. Mosquito Dunks photo courtesy of Amazon Services LLC Associates Program.