Cutaneous leishmaniasis is a protozoal infection generally considered to be limited to the skin. In Israel, the disease is common in geographically defined areas and is caused predominantly by Leishmania major. Sporotrichoid subcutaneous spread has been reported but is uncommon. We describe a patient with rheumatoid arthritis, treated with methotrexate and prednisone, in whom numerous rheumatoid nodules concomitant with cutaneous leishmaniasis were found, mimicking sporotrichoid spread of the disease. In a rheumatoid nodule that was examined by electron microscopy, Leishmania parasites were found at intracellular and extracellular locations. This observation supports the hypothesis that cutaneous leishmaniasis parasites persist after clinical cure of the disease and may re-emerge as a result of immunosuppression.