Cutaneous leishmaniasis (CL) is a common vector-borne neglected tropical disease caused by protozoan parasites endemic to Ethiopia. Evidence of the molecular epidemiology of CL in communities in endemic areas of Ethiopia is scarce. This study aimed to investigate the molecular epidemiology, distribution, and determinants of CL. This community-based, cross-sectional study was conducted between March 2022 and 2023 on 356 suspected CL cases. DNA was extracted from the skin-scraped samples, and Leishmania parasite detection and species identification were performed via polymerase chain reaction (PCR). Variable and multivariate binary logistic regressions with AORs and p values ≤ 0.05 were used to identify determinants and determine the strength of the associations. Among the 384 suspected cases, 356 were included in the study, resulting in a response rate of 92.7%. Among the 356 suspected cases, 253 (71.1%) were positive for the Leishmania parasite according to PCR. Leishmania aethiopica was the only causative agent of CL in this study area. More confirmed CL cases were recorded among those living in poor housing conditions. The presence of animals in the house (AOR: 2.06; 95% CI: 1.23-3.43), being in the age group of < 9 years (AOR: 2.94; 95% CI: 1.21-7.14), being in the age group between 9 and 19 years (AOR: 3.23; 95% CI: 1.89-5.51), and the size of the household of five years and above (AOR: 2.78; 95% CI: 1.60-4.84) had a statistically significant association with CL. This study revealed that CL is a major public health problem in Northeast Ethiopia, and targeted and tailored control strategies are needed to mitigate the burden in this area.