We conducted active surveillance for kala-azar and post-kala-azar dermal leishmaniasis (PKDL) in a population of 24,814 individuals. Between 2002 and 2010, 1,002 kala-azar and 185 PKDL cases occurred. Median PKDL patient age was 12 years; 9% had no antecedent kala-azar. Cases per 10,000 person-years peaked at 90 for kala-azar (2005) and 28 for PKDL (2007). Cumulative PKDL incidence among kala-azar patients was 17% by 5 years. Kala-azar patients younger than 15 years were more likely than older patients to develop PKDL; no other risk factors were identified. The most common lesions were hypopigmented macules. Of 98 untreated PKDL patients, 48 (49%) patients had resolution, with median time of 19 months. Kala-azar patients showed elevated interferon-γ (IFNγ), tumor necrosis factor-α (TNFα), and interleukin 10 (IL-10). Matrix metalloproteinase 9 (MMP9) and MMP9/tissue inhibitor of matrix metalloproteinase-1 (TIMP1) ratio were significantly higher in PKDL patients than in other groups. PKDL is frequent in Bangladesh and poses a challenge to the current visceral leishmaniasis elimination initiative in the Indian subcontinent.