Background Inflammatory bowel disease (IBD) and irritable bowel syndrome (IBS) share overlapping symptoms, making differentiation challenging. IBD, which includes ulcerative colitis (UC) and Crohn's disease (CD), involves chronic inflammation requiring long-term management, whereas IBS is a functional gastrointestinal disorder without organic pathology. Fecal lactoferrin, a biomarker of intestinal inflammation, has emerged as a potential noninvasive diagnostic tool for distinguishing IBD from IBS. Objective This study aimed to measure and compare fecal lactoferrin levels in patients with IBD, IBS, and healthy controls to evaluate its diagnostic accuracy in differentiating IBD from IBS in a resource-limited setting. Methods A cross-sectional comparative study was conducted at the Department of Gastroenterology, Bangabandhu Sheikh Mujib Medical University (BSMMU), Dhaka, Bangladesh, from January 2016 to June 2017. The study included 50 diagnosed IBD patients, 25 IBS patients (based on Rome III criteria), and 25 healthy controls. Fecal lactoferrin levels were measured using enzyme-linked immunosorbent assay (ELISA), with a cutoff value of 7.75 µg/g considered indicative of intestinal inflammation. Sensitivity, specificity, positive predictive value (PPV), and negative predictive value (NPV) were calculated. Data were analyzed using IBM SPSS Statistics for Windows, Version 25 (Released 2017; IBM Corp., Armonk, New York, United States), with statistical significance set at p < 0.05. Results The mean fecal lactoferrin levels were significantly higher in IBD patients (83.01 ± 48.54 µg/g) compared to IBS patients (6.39 ± 2.69 µg/g) and healthy controls (6.80 ± 2.30 µg/g) (p < 0.001). At a cutoff of 7.75 µg/g, fecal lactoferrin demonstrated 88% sensitivity, 84% specificity, 92% PPV, and 78% NPV in distinguishing IBD from IBS. The area under the receiver operating characteristic (ROC) curve was 0.908, indicating excellent diagnostic performance. Conclusion Fecal lactoferrin is a highly sensitive and specific biomarker for differentiating IBD from IBS. Its use as a noninvasive diagnostic tool could reduce unnecessary endoscopic procedures and aid in early and accurate diagnosis, particularly in resource-limited settings like Bangladesh. Further large-scale studies are recommended to validate these findings.