The study was conducted in Kohat, Hangu and Karak districts of Khyber Pakhtunkhwa from February 2010 to March, 2011. House to house surveys were conducted and 3590 samples consisting of tissue/blood smears on glass slides, filter papers and tissue biopsy/aspirate were collected from cutaneous leishmaniasis (CL) suspected patients. The overall prevalence of CL in these studied districts using PCR was 2.54 %. The highest degree of prevalence was recorded in Karak that was 3.17 % followed by Kohat 2.70 % and Hangu 1.85 %. Statistical analysis showed that children of age group 0-15 year were significantly more susceptible to CL. Although statistically non significant correlation was found on gender basis. The highest prevalence of active lesions was recorded in March (602 patients), while the lowest prevalence of lesions was recorded in December (53 patients). Presence of domestic animals, wall and roof type, presence of internally displaced people (IDPs) and were associated with increased risk of cutaneous leishmaniasis. Comparison of sensitivity and specificity of different diagnostic assays showed that Kinetoplastic DNA- PCR was the most sensitive (97.08%) of all the assays while specificity of this assay (77.3 %) was lower than the ribosomal and Internally transcribed spacer 1 primers had 100 % specificity. The ITS1-PCR-RFLP analysis using Haemophilis III enzyme (Hae III) confirmed L. tropica in 241 out of 275 ITS1 PCR amplified products and only 25 of the total samples were recognized as L. major. Sequencing analysis using ITS1 gene and 12.0010 gene confirmed L. tropica in 40 samples representing different villages. This is the first report of prevalence and molecular characterization and identification of prevailing Leishmania species from Southern districts of Khyber Pakhtunkhwa.