Mycobacterium ulcerans is the causative agent of Buruli ulcer (BU), a destructive skin disease found predominantly in sub-Saharan Africa and south-eastern Australia. The precise mode(s) of transmission and environmental reservoir(s) remain unknown, but several studies have explored the role of aquatic invertebrate species. The purpose of this study was to investigate the environmental distribution of M. ulcerans in south-eastern Australia. A range of environmental samples was collected from Point Lonsdale (a small coastal town southwest of Melbourne, Australia, endemic for BU) and from areas with fewer or no reported incident cases of BU. Mycobacterium ulcerans DNA was detected at low levels by real-time PCR in soil, sediment, water residue, aquatic plant biofilm and terrestrial vegetation collected in Point Lonsdale. Higher levels of M. ulcerans DNA were detected in the faeces of common ringtail (Pseudocheirus peregrinus) and common brushtail (Trichosurus vulpecula) possums. Systematic testing of possum faeces revealed that M. ulcerans DNA could be detected in 41% of faecal samples collected in Point Lonsdale compared with less than 1% of faecal samples collected from non-endemic areas (p<0.0001). Capture and clinical examination of live possums in Point Lonsdale validated the accuracy of the predictive value of the faecal surveys by revealing that 38% of ringtail possums and 24% of brushtail possums had laboratory-confirmed M. ulcerans skin lesions and/or M. ulcerans PCR positive faeces. Whole genome sequencing revealed an extremely close genetic relationship between human and possum M. ulcerans isolates. The prevailing wisdom is that M. ulcerans is an aquatic pathogen and that BU is acquired by contact with certain aquatic environments (swamps, slow-flowing water). Now, after 70 years of research, we propose a transmission model for BU in which terrestrial mammals are implicated as reservoirs for M. ulcerans. Mycobacterium ulcerans is the causative agent of Buruli ulcer (BU), a destructive skin disease found predominantly in sub-Saharan Africa and south-eastern Australia. The mode of transmission and environmental reservoir remain unknown, but several studies have explored the role of aquatic insects, such as water bugs, and biting insects, such as mosquitoes. In the present study we investigated possible environmental source(s) of M. ulcerans in Victoria, Australia. Our results revealed that although M. ulcerans DNA could be detected at low levels in a variety of environmental samples, the highest concentrations of M. ulcerans DNA were found in the faeces of two species of possums, common ringtails and common brushtails. Possums are small arboreal marsupial mammals, native to Australia, and these particular species occur in both urban and rural areas. Examination and sampling of live captured possums in an area endemic for BU revealed that 38% of ringtail possums and 24% of brushtail possums, respectively, had laboratory-confirmed M. ulcerans lesions and/or M. ulcerans PCR-positive faeces. The finding that large numbers of possums in a BU-endemic area are infected with M. ulcerans raises the possibility that mammals are an environmental reservoir for M. ulcerans.