Parasitic co-infections are prevalent in many parts of the world. However, relatively little is known about how an underlying infection may impact on the host's ability to control a newly acquired parasite, especially if both infect the same organ. We have studied this using an experimental co-infection model in C57BL/6 mice involving Schistosoma mansoni and Leishmania donovani, two important human pathogens affecting the liver. We show that mice with established S. mansoni infections fail to control L. donovani growth in the liver and spleen. The failure occurs despite the development of a functional anti-L. donovani Th1 response that can mediate granuloma formation and effective clearance of amastigotes from foci of infection in the hepatic parenchyma. Instead, anti-leishmanial immunity fails within the S. mansoni egg granuloma, consistent with a lack of L. donovani granuloma assembly in this tissue microenvironment and consequent lack of NO production. Persisting amastigote replication in the S. mansoni egg granulomas may thus explain the increased L. donovani burden in the liver and spleen. These results may have implications for human S. mansoni and L. donovani co-infections and also demonstrate that granulomatous tissue responses to helminth organisms can form a discrete niche facilitating survival of intracellular pathogens.