Fairy Queen surrounded by malice (6)
I believe the answer is:
sprite
'fairy' is the definition.
(I know that fairy can be written as sprite)
'queen surrounded by malice' is the wordplay.
'queen' becomes 'r' (abbreviation for regina, e.g. in ER ).
'surrounded by' means one lot of letters goes inside another.
'malice' becomes 'spite' (synonyms).
'r' inserted into 'spite' is 'SPRITE'.
(Other definitions for sprite that I've seen before include "Nimble elf-like creature - icon in computer game" , "water pixie" , "Naiad" , "sports car" , "Supernatural being" .)