We conducted a case-control study to evaluate risk factors for visceral leishmaniasis during an epidemic in a previously unaffected district of Ethiopia. We also collected blood and bone marrow specimens from dogs in the outbreak villages. In multivariable analyses of 171 matched case-control pairs, dog ownership, sleeping under an acacia tree during the day, and habitually sleeping outside at night were associated with significantly increased risk. Specimens from 7 (3.8%) dogs were positive by immunofluorescent antibody test (IFAT) and both enzyme-linked immunosorbent assays (ELISAs), whereas Leishmania DNA was detected in 5 (2.8%) bone marrow aspirates (from 3 seropositive and 2 seronegative dogs). Insecticide-treated nets may only protect a portion of those at risk. Further research on the vectors, the role of the dog in the transmission cycle, and the effect of candidate interventions are needed to design the best strategy for control