In 2006/7, 18 cases of cutaneous leishmaniasis (CL) were reported for the first time from Sde Eliyahu (pop. 650), a village in the Beit She'an valley of Israel. Between 2007-2011, a further 88 CL cases were diagnosed bringing the total to 106 (16.3% of the population of Sde Eliyahu). The majority of cases resided in the south-western part of the village along the perimeter fence. The causative parasite was identified as Leishmania major Yakimoff & Schokhor, 1914 (Kinetoplastida: Trypanosomatidae). Phlebotomus papatasi (Scopoli), 1786 (Diptera: Psychodidae) was found to be the most abundant phlebotomine species comprising 97% of the sand flies trapped inside the village, and an average of 7.9% of the females were positive for Leishmania ITS1 DNA. Parasite isolates from CL cases and a sand fly were characterized using several methods and shown to be L. major. During a comprehensive survey of rodents 164 Levant voles Microtus guentheri Danford & Alston, 1880 (Rodentia: Cricetidae) were captured in alfalfa fields bordering the village. Of these 27 (16.5%) tested positive for Leishmania ITS1 DNA and shown to be L. major by reverse line blotting. A very high percentage (58.3%-21/36) of Tristram's jirds Meriones tristrami Thomas, 1892 (Rodentia: Muridae), found further away from the village also tested positive for ITS1 by PCR. Isolates of L. major were successfully cultured from the ear of a wild jird found positive by ITS1 PCR. Although none of the wild PCR-positive voles exhibited external pathology, laboratory-reared voles that were infected by intradermal L. major inoculation, developed patent lesions and sand flies became infected by feeding on the ears of these laboratory-infected voles. This is the first report implicating M. guentheri and M. tristrami as reservoirs of Leishmania. The widespread co-distribution of M. guentheri and P. papatasi, suggests a significant threat from the spread of CL caused by L. major in the Middle East, central Asia and southern Europe.