This study was conducted to characterize the transmission cycle of the tegumentary leishmaniasis (TL) in an old colonization area at Pernambuco State, Brazil. The aims were to identify autochthonous cases, sandflies fauna, domestic animals as possible reservoir hosts and the Leishmania species involved in this endemic area. A total of 168 suspected human cases of TL and 272 domestic animals (canine, feline, equine, goat, and sheep) were included. The sandflies were captured and identified by species. Patients were predominantly male and the average age was 37+18.1 years old. Of 85 patients who had skin lesions, 25.6% of them had direct positive smears for TL and 34 isolates were identified as Leishmania (Viannia) braziliensis. The confirmation for TL diagnosed by molecular detection (PCR) was almost three times more sensitive than the direct test [p < 0.001; PR = 2.72] associated with clinical examination. The Kappa test on PCR between two different specimens, biopsy, and skin lesion swab was 60.8% (p < 0.001). More than 200 specimens of sandflies (80 males and 159 females) were captured and identified as Lutzomyia whitmani (99.6%) and Lu. evandroi (0.4%). The detection of L. (V.) braziliensis by Real-Time PCR in the blood of a captured fed female was positive in 59.3% of Lu. whitmani. Of the 272 domestic animals included, 61.76% were male (n = 168). Thirty-six animals (13.2%) had lesions compatible with TL (34 dogs, 1 cat and 1 sheep) and 3 of them, all dogs, had lesions on the snout, showing destruction of cartilage and mucosa. The study suggests the participation of domestic animals as possible reservoirs. However, further studies are necessary to better understand the transmission cycle and take recommended measures in order to control the disease.