BACKGROUND: Cutaneous leishmaniasis (CL) is a major problem in many tropical and subtropical countries. The clinical diagnosis should be confirmed by identification of the parasite in biopsy or smear or by tissue culture. The sensitivity of direct microscopy is not high, and tissue culture is not uniformly available and successful. Polymerase chain reaction (PCR) is a sensitive test for the detection of low amounts of DNA in tissues. OBJECTIVE: We applied PCR on paraffin-embedded skin biopsies to assess the validity of this method in the diagnosis of cutaneous leishmaniasis. METHODS: DNA extraction from paraffin blocks was performed by the heat method, and PCR was carried out using the primers for the Leishmania-specific 120-base-pair fragment of kinetoplast DNA minicircles. Paraffin blocks of gelatin-embedded formalin-fixed Leishmania tropica, taken from culture, served as positive controls. Negative controls were the skin biopsies of patients whose clinicopathologic diagnoses were not cutaneous leishmaniasis. RESULTS: PCR showed the parasite in all 33 cases whose skin biopsies had shown the Leishmania parasite by light microscopy. PCR results were also positive in 24 cases out of 29 where microscopic examination of skin biopsies had failed to detect the amastigote but their clinical diagnosis was CL. The sensitivity of PCR in the diagnosis of CL was 92%. None of the nonleishmaniasis cases showed positive results (specificity 100%). PCR results were positive in 52 out of 54 cases whose skin biopsies showed granulomatous inflammation. Evaluation of the histopathologic findings showed that the presence of vaguely formed immature granuloma was directly and the detection of mature well-formed granuloma was inversely correlated with the detection of the parasite in biopsies (p < 0.01). CONCLUSION: PCR on paraffin-embedded tissue is a highly sensitive and specific test for the diagnosis of CL, and detection of granulomatus inflammation is a highly reliable histopathologic finding in suspected cases.