We detected an outbreak of American cutaneous leishmaniasis in the Jequitinhonha River Valley, Minas Gerais, Brazil. Clinical and epidemiological aspects were studied for a period of two years. Data include results of physical examinations, Montenegro skin test and serology. In total 72 of the 299 individuals evaluated presented active lesions. Only one case out of these 72 patients showed the mucosal form of the disease. The precarious sanitary conditions, low educational level and low income found in the population studied demonstrated that, as with the other parasitic diseases, cutaneous leishmaniasis occurs with greater frequency in needy populations. A canine serological survey detected 20.3% (30/148) of dogs reactive to the Leishmania antigen. Lutzomyia intermedia was the predominant phlebotomine species and the majority of the specimens (84.9%) were captured in the peridomicile. Four samples from human and three from canine cases were isolated and characterised by PCR and isoenzymes as being Leishmania (Viannia) braziliensis. The peridomiciliary nature of the disease is discussed.