As part of a survey of human leishmaniasis in Nicaragua we examined phenotypic and genotypic characteristics of 40 Leishmania isolates. We identified 3 distinct parasites associated with cutaneous disease in this area; Leishmania panamensis (40% of cases), Leishmania braziliensis (33%), and a strain which exhibits the heterozygous isoenzyme and DNA fingerprinting patterns expected of a L. panamensis/L. braziliensis hybrid (27%). There was complete correlation between the isoenzyme and DNA data for each of the putative hybrids examined. All of the 'hybrids' were obtained from foci in the northern region of the country where L. panamensis and L. braziliensis occur sympatrically. These observations provide strong evidence for sexual reproduction in New World Leishmania populations and suggest that it is of taxonomic and epidemiological significance.