EDITOR'S NOTE: We visited this store in June 2007 and haven't been back since. If you want to visit, you may want to call first!
With the help of a friendly Hungarian, I found this store at 16b Ullioi street. Take the M3 (blue) metro line. Get off at Kalvin ter. Walk to each exit until you see the one for Ullioi street. Don't attempt to take the first exit and expect to find it from above. There are no cross walks and this intersection has 6 different directions! You need to do this from underground and Murphy's law says that the Ullioi street exit will be the last exit that you'll find!
The store is 1 block further away from the station on the North side of the street. However, don't just bolt to the store! If you look very carefully, both sides of the street are FILLED with craft stores (beading, scrapbooking, painting, etc). We think we counted at least 6 craft stores within a 3 block area on Ullioi street. It appeared that beading was the most popular (at least 3 stores with a wide variety and lots of ladies inside choosing their Swarovski and Czech beads).
We found a store that looked like a miniature ""Michaels"" - it had magazines in German and Italian. But no knitting, per se. Most of the products (ie scrapbooking, painting etc) seemed to be imported from other areas of Europe. We geese were happy to find German knitting magazines (which were rare in France).
Map of the area...if you're in Budapest, you'll get the tourist map, then you can find this area here! Stores on both sides of the street!

Mesebolt - Patchwork, knitting, crochet, counted cross stitch and needlepoint with lots of Japanese patchwork books and American quilting fabric. Knitting magazines are German magazines translated into Hungarian. Some Italian magazines.
Yarn selection...low, mostly German yarn from Coats and Clark (Red Heart). The guy here was REALLY nice, speaks fluent English and smiles (a rarity in Budapest!). He says that most people don't care for the plain, Red Heart yarn. They like the fluffy, sparkly stuff and the varigated cotton yarn (ie variations of blue or variations of red, not in ranges from one color to another). He also said that crochet was more popular now (compared to knitting) and that counted cross stitch and needle point was even more popular. He said that there aren't any more dedicated knitting stores but that you might find yarn in fabric stores.
We loved the magazines and bought that . He also has all of the ""staples"" like needles etc...in case of a Knitting emergency.
