Leishmaniasis is a neglected tropical disease transmitted by Phlebotomus spp. sand flies. Cutaneous leishmaniasis (CL) in Sri Lanka is caused by Leishmania donovani. Transmission patterns are different in Southern and Northern Sri Lanka. Current study examined the prevalence, risk factors and distribution of CL in Matara District, Southern Sri Lanka. Total of 2260 individuals from four District Secretariat divisions (DSDs) were screened by house to house surveys using an interviewer administered questionnaire. The study population had an age range of 1–90 years (median  =  43  ±  17.31), low monthly income ( < 20 000 LKR, 52.8%) and a male to female ratio of 1 : 2. Thirty eight patients were diagnosed by light microscopy, culture and/or PCR with a disease prevalence of 1.68%. Spatial mapping provided evidence for significant case clustering, which tended to be more prominent with proximity to forest areas. The risk factors identified were un-plastered brick walls, absence or low usage of protective measures against insect bites, low income and excessive time (>4 hours/day) spent outdoors. However, exposure of limbs while outdoors, unawareness about the disease, type of occupation, common water source as the mode of water supply and presence of animal shelters within 200 m were not associated with the risk of acquiring the disease. Peri-domestic transmission is likely to contribute to the observed case clustering with all age groups at risk of acquiring the infection. Human behavioural habits coinciding with that of the vector, sand fly are likely to enable host-vector contact promoting its spread. Appropriate vector control measures, improvement of housing conditions, public education regarding preventive measures are required to contain the spread of disease.