Background Leprosy has been treated with multidrug therapy, which has been distributed for free across the globe and regarded as highly efficient. However, the impossibility of growing Mycobacterium leprae in axenic media has historically impaired assessments of M. leprae resistance, a parameter only recently detectable through molecular methods. Methods A systematic, population-based search for M. leprae resistance in suspected leprosy relapse cases and contacts was performed in Prata Village, an isolated, hyperendemic, former leprosy colony located in the Brazilian Amazon. Results led to an extended active search involving the entire Prata population. Confirmed leprosy cases were investigated for bacterial resistance using a combination of in vivo testing and direct sequencing of resistance genes folP1, rpoB, and gyrA. A molecular epidemiology analysis was performed using data from 17 variable number tandem repeats (VNTR). Results Mycobacterium leprae was obtained from biopsies of 37 leprosy cases (18 relapses and 19 new cases): 16 (43.24%) displayed drug-resistance variants. Multidrug resistance to rifampicin and dapsone was observed in 8 relapses and 4 new cases. Single resistance to rifampicin was detected in 1 new case. Resistance to dapsone was present in 2 relapses and 1 new case. Combined molecular resistance and VNTR data revealed evidence of intra-familial primary transmission of resistant M. leprae. Conclusions A comprehensive, population-based systematic approach to investigate M. leprae resistance in a unique population revealed an alarming scenario of the emergence and transmission of resistant strains. These findings may be used for the development of new strategies for surveillance of drug resistance in other populations.