Topical delivery is preferable over systemic delivery for cutaneous leishmaniasis, because of its easy administration, reduced systemic adverse effects and low cost. Nitazoxanide (NTZ) has broad-spectrum activity against various parasites and has the potential to avoid drug resistance developed by enzymatic mutations. NTZ oral formulation is associated with severe dyspepsia and stomach pain. Herein, NTZ-transethosomes (NTZ-TES) were prepared and loaded into chitosan gel (NTZ-TEG) for topical delivery. NTZ-TES were prepared by the thin-film hydration method and optimized statistically via the Box-Behnken method. The optimized formulation indicated excellent particle size (176 nm), polydispersity index (0.093), zeta potential (−26.4 mV) and entrapment efficiency (86%). The transmission electron microscopy analysis showed spherical-sized particles and Fourier-transform infrared spectroscopy analysis indicated no interaction among the excipients. Similarly, NTZ-TEG showed optimal pH, desirable viscosity and good spreadability. NTZ-TES and NTZ-TEG showed prolonged release behaviour and higher skin penetration and deposition in the epidermal/dermal layer of skin in comparison with the NTZ-dispersion. Moreover, NTZ-TES showed higher percentage inhibition, lower half-maximal inhibitory concentration (IC 50) against promastigotes and higher macrophage uptake. Additionally, skin irritation and histopathology studies indicated the safe and non-irritant behaviour of the NTZ-TEG. The obtained findings suggested the enhanced skin permeation and improved anti-leishmanial effect of NTZ when administered as NTZ-TEG.