During surveillance for endemic visceral leishmaniasis on an island off the Pacific coast of Honduras, an unusual form of cutaneous leishmaniasis was encountered. By clinical and laboratory criteria, 17 cases were identified over 5 months; children aged 4 to 15 years were primarily affected. Lesions were generally few in number, small, always papular, and non-ulcerative, even when present for several years. Patients with skin lesions seemed otherwise healthy and were well nourished. Montenegro skin tests with Leishmania mexicana and L major antigens were positive in 10 of 17 patients tested, and lesions from 9 patients were positive by culture. Since the summer of 1988, cases of atypical cutaneous leishmaniasis continue to occur on the island (8) as well as on the mainland of southern Honduras (23). A total of 9 parasite isolates from skin lesions, 4 from bone marrow of patients with kala-azar, and 2 from sandflies were identified as L donovani chagasi and were indistinguishable from one another by isoenzyme analysis.