Reports from a health center in Esfahan province show an increase in cutaneous leishmaniasis (CL) cases in the southern areas during 2000–2002, leading us to carry out an epidemiological study using standard techniques in Mobarakeh county, central Iran in 2003. Data were collected on the prevalence of scars and active lesions among 1237 households in Dehsorkh district (3086 residents) and 191 children attending primary schools in Mobarakeh city. Smears were prepared by scraping the edges of the active lesions. To determine the reservoir host of the disease, rodents and dogs were caught and examined. Sand flies were collected biweekly from indoor and outdoor locations in the study areas. Parasites isolated from humans and rodents were characterized by RAPD-PCR technique. The prevalence of scars and active lesions was 2.5% and 1.6% respectively in the 3086 residents of Dehsorkh district and 6% and 4% respectively in the schoolchildren. Among rodents, 7 of 18 Nesokia indica (39%) and 1 of 9 Meriones persicus (11%) were found to be infected with Leishmania major. Phlebotomus papatasi was the commonest sand fly species indoors and outdoors. Although CL has been present in some northern counties of Esfahan province, our investigation revealed that the disease has spread to southern parts of the province. Rapid treatment of patients, destroying gerbils, and promotion of general and health education for the local population is recommended.