From the Honduran border, you can take a bus to Ocotal, then from Ocotal to Esteli.
From the south, there are frequent buses from Managua and other points. Buses from Managua every 30 minutes.
From León : Also expressos , (a regular one leaves about 9.30AM from the north terminal).
There are two bus stations both on the Pan American about 100m from each other. The southern is smaller and better organised but more buses come and go from the north. Most main destinations are served by both though so you will need to check both for times etc.
Both stations are a little out of the main town (C$15-C$20 in collectivo to the Parque Central 2007). 20 minutes walking from the Parque Central. Turn left at the first paved road and then right about 4 blocks later - when you hit the main north/south street (with lots of shops, comedores and people around).
Visit Miraflor, an agricultural cooperative a couple of hours outside of Esteli in the mountains. There are a number of places at Miraflor where you can stay in cabins or with families, ride horses, meet farmers, looks at orchids, etc. Visit Hospedaje Luna (below) for more information. Doña Corina's Posada La Soñada is well liked; a bed and 3 meals a day costs US$17 in a family house and US$20 in a cabaña.
Tisey is a nature preserve just south of Esteli. Take a city bus to the hospital, and then a local bus up the mountain or catch the bus to Tisey at the Cotran Sur on the Pan American highway. On the way up, you can stop in Estanzuela and see a waterfall. The water looks too dirty for swimming and there's lots of garbage everywhere (Nov 2007). But worth the trip.
Further up the road is La Garnacha, a community consisting mostly of organic farmers plus a factory of some amazingly good cheese. To visit, you need to get off the bus at the La Garnacha sign and walk up their road about 2km. From there, if you are still up for a hike, you can walk to and climb up Cerro Apaguají. It is on private property but open to the public. It's about another 1km of hike from La Garnacha. From the cerro you can see Lake Managua to the south, the chain of volcanos along the Pacific and, on a clear day, part of El Salvador on the other side of the Gulf of Fonseca.
Learn Spanish: There are several Spanish schools around town. When foreign volunteers would come to Esteli to help the Sandinistas they would often study in Esteli. Escuela Horizonte  is a respectable one : $220 a week for 3.5 hours of instruction, excursions and homestay with a local family including 3 meals a day (at least two of which will be gallo pinto).
Spanish School Nicaragua, Hotel Panorama #1 one block west 20 meters to the north, . 8:00 to 5:00 pm. Study Spanish with a native Spanish teacher and get your first Spanish lesson freeU$180 for 4 hours of Spanish classes per day, homestay with three meals andtow social activites in the afternoon. edit
The Esteli region is also home to many fine cigar companies, most of whom will allow a prearranged tour, and some of whom offer special package tours of their factories (Drew Estate, in particular).
Here is a rare find. Visit Proyecto de Las Mujeres Ambientalistas these friendly women will show you how they make paper and will actually let you get your hands wet to make some paper yourself. The central core of their work is recycling paper mixed with plant-based waste such as banana stalks, corn husks, coconut shells, onion skins and other vegetable fibres. They make their own unique textured papers by hand. After sun-drying they artfully craft them into beautiful greeting cards and other items which they display and make available for you to acquire to take with you.
The Women Recycle Paper Here
They have three organic gardens one for natural herbal medicines donated by Stanford University in 2010, one for organic vegetables and one for indigenous tropical plants that you can stroll through during weekdays. This is an excellent photo opportunity, you can pose in front of beautiful rich colourful murals, painted on the outside walls that tell the history of the project and show the steps of the papermaking process. All this rests in a large, tranquil, park-like setting. Another building has a mural showing the development of the Ekokids from the surrounding barrios, especially Boris Vega.
These underprivileged kids are learning good environmental and health practices.
If you have the time, they encourage you to spend time volunteering and living with a family in the barrio for a week or month or longer to really learn the culture better. Some volunteers have stayed for a year or more. It is located 4 blocks west of the water tank located in the south end of Mercado de Alfredo Lazo in southwest Estelí.
There is a public market called El Mercado Alfredo Lazo in the south end of town. Easy to find or just ask. Just north of that market are lots of leather shops. Good stuff at good prices. For example, you can probably get a custom made pair of boots for around US$50.
Cafe Luz, (Across the street from Hospedaje Luna). Excellent local and international food at reasonable prices in a great environment with friendly staff.edit
Mocha Nana Cafe, Avenida Principal, Parque Infantil 1/2 c. al Sur (On Avenida Principal, 1/2 block South of of Parque Infantil.). Brilliant waffles, cakes, bagels, batidas, and good coffee, mocha coffee drinks, fresh juices, light fare of sandwiches and sopas.edit
Koma Rico, (One block from the northeast corner of the park), ☎ 2713-4446. A real local experience. Their menu is verbal and usually only has a few choices. Good prices and big portions.edit
Rincon Legal is the most interesting bar in Esteli, a huge space filled with old Sandinista propaganda posters and memorabilia. The owner is an interesting character. It's in the south of the city, around 9e or 10e Calle west. They have great concerts from time to time.
UPDATE 27 feb 2011: this place seems to have been closed.
Los Semaforos - Best weekend dance venue, Rancho bar, made of palm roof stylee, great live music, watch out for "Cafe", young group, mixed age clientelle, good disco imbetween live music. Thurs through Sun.
Cigars Zone - Modern and upscale disco and lounge. Sells excellent cigars as well. Opened february 2010. C$100 (5 USD) entry fee. Mixed local and tourist / business travellers clientelle.
El Chaiman - Best locals venue, no entry fee, great Kumbia group, Zeta Eme (ZM), at weekends and disco. All a bit like a busy wedding party.
Zona Cero - Well known Karaoke bar, open all week. Try Ranchero or Abba.
Rancho Legal - Set at the old Rancho Santa Elena, up by the Torre, varied bands and nice rustic furnishings, part of Rincon Legal.
Axsis - Formerly the legendary Studio 54, fairly central on the Pan Am, much of the same beautiful people dancing reggaeton and Donna Summa. Karaoke inside too.
Casino Las Vegas - Near market on calle central. Packed small Karaoke bar, with cheesy carpets, sponge-painted Vegas surrounds the serious singers, smoke filled atmosphere that parties until dawn.
Cafe Luz, (Opposite Hostel Luna. One block from El Meson hotel). Great evening atmosphere with really excellent, well priced food, local rum and Mojitos to challenge Cuba. Cold local Beers and good Chilean wines too. Often has local musicians entertaining. edit* ' -
Sonati Hostel, (2 blocks East of the Cathedral (NorthEast corner, same street as La Colonia Supermarket)), ☎ 505-2713-6043, . Brand new hostel, opened in October 2012. So basically everything is new, with a big/clean kitchen, expansive garden in the back, free wifi, free coffee. SONATI is a not-for-profit NGO and their main activity is actually providing free environmental education to local school children; and all the profits from the hostel and the tours they make go for that. The original Sonati is located in Leon and it's a great place!Dorms from $7, privates from $15. edit
Hotel Nicarao, (on the east side of the main street a couple blocks south of the Parque Central). Beautiful, clean hotel with simpatico staff, rooms are arranged around a central garden with tropical birds and a friendly duck. Double with private bath and TV: US$17.50, single with shared bath, and no TV: C$233/US$10. edit
Hospedaje Luna, (from the back of the cathedral, it's only 1 block north on the left hand side), . Gringo central with clean dorms and a few single rooms: clean, fresh, attractive and fun, with central garden, hammock and seating area, cable TV lounge and movies for all, with the cheapest rates for backpackers, couples and group, the dorms are $8 per person, good place to meet other travellers, and get information in English and Spanish. Has hot water, laundry facilities, free organic coffee and teas, bike hire, cigar factory tours, live music nights out tours, and more. Make reservations or be sure to be abundantly clear with your intended length of stay as they will not hestitate to give your bed away from under you if a larger group should require it. NO lockers in the dorms.edit
Hotel Sacuanjoche, 1 block east of Pali supermarket, ☎ 713-2482. -pros: cheapest deal in Esteli (6$ single, 10$ double), charming old hotel, nice lobby w. reading area, courtyard, communal kitchen, relatively clean -cons: bitter old prejudice owners = jaded & inhospitable (family who runs it) they apparently have a grudge against americans or western tourists = they kicked me out & said `this is not your country, this is my country! you cant do whatever you want`...because I wanted to rent a bigger room ?(move from the single to a double) but they protested `no, you are only 1 person you can`t rent a big room` (ridiculous & un-professional). single room has pvt shower, towel, but no soap, no fan, & no wall plug (no electricity !)120-300 cordobas. edit
An old school bus full of Nicaraguans goes from Esteli direct to Guatemala City for 27USD, leaving at noon on Wednesdays from the gas station on the north end of town. Much cheaper than Ticabus, and you're traveling with real Nicaraguans, not foreigners.