BACKGROUND Cutaneous leishmaniasis (CL) is endemic in the highlands of Ethiopia, and almost always caused by Leishmania aethiopica. Hitherto, Addis Ababa (the capital city of Ethiopia) was not considered endemic for CL, mainly due to absence of epidemiological and field ecological studies. This report summarizes the preliminary epidemiological investigation that proved the existence of active transmission in southeastern Addis Ababa. RESULTS Active case finding surveys were conducted in 3 localities, Saris, Kality, and Akaki, which are found in and around Bulbula-Akaki river gorges. During the surveys conducted in January 2005 - May 2006, a total of 35 cases with 9 active and 26 healed skin lesions were identified. Eighteen of the cases (51.4%) were found in Saris; while 10 (28.6%) and 7 (20%) cases were from Kality and Akaki respectively.Ten colonies of rock hyraxes (Heterohyrax brucei) were identified in the vicinities of the 3 localities. Three of the 48 hyraxes (6.3%) trapped from the surroundings harbored natural infections of Leishmania aethiopica. Confirmation of the Leishmania species of the 3 isolates was achieved by PCR amplification and RFLP analysis of the ribosomal DNA internal transcribed spacer (ITS) sequences. Based on sandfly species composition and proximity of resting sites to human settlements, Phlebotomus longipes is circumstantially proven to be the vector of CL in south east Addis Ababa. CONCLUSIONS The study proves the existence of isolated zoonotic foci of CL in south eastern Addis Ababa, with P. longipes as the likely vector and H. brucei as the natural reservoir host.