Cutaneous leishmaniasis (CL) is endemic in the northwest of Isfahan province, Iran. Increase in the incidence of the disease in Kashan has made it necessary to find out the best method for diagnosis and molecular characterization of Leishmania species. In the present study, 130 patients suspected to cutaneous leishmaniosis referred to health care centers of Kashan were examined. Serosity of lesion was collected for smear preparation and cultured in Novy-Nicolle-McNeal medium. DNA was extracted from serosity, and Leishmania species was determined by polymerase chain reaction (PCR) and nested PCR using kinetoplast DNA (kDNA) specific primers. The diagnostic criteria of CL were based on the observation of amastigotes in the smear, promastigotes in culture, presence of expected bands in PCR, or nested PCR. Of 130 specimens, 87 (66.9%), 72 (56.2%), 98 (75.4 %), 96 (73.8%), and 99 (76.2%) were positive for microscopic culture, PCR, nested PCR, and combined PCR and microscopy (proposed method), respectively. Sensitivity, specificity, positive and negative predictive values of PCR were 99%, 100%, 100%, 96.9%, respectively, for microscopy 87.9%, 100%, 100%, 72.1%, for culture 72.7%, 100%, 100%, 53.4 %, and for nested PCR 97%, 100%, 100%, 91.2%, respectively. Based on the results of the study, kDNA-PCR was the most sensitive method for diagnosis of CL.