Add the config parameter 'image_conversion_dir' in cinder.conf (this is basically the directory used for temporary storage during image conversion) and set it to some directory to which the cinder service has all permissions (rwx). Restart the cinder-volume service and then try creating the volume from image.

exact error:

cinder.api.middleware.fault [...] Caught error: [Errno 13] Permission denied

I ended up not only creating the directory unmesh suggests, but giving it full ownership and permissions.

cinder.conf
...
# Directory to use for lock files. Default to a temp directory
# (string value)
#lock_path=<None>
lock_path=/var/lock/cinder

#directory used for temporary storage during image conversion
image_conversion_dir=/var/lock/cinder
...

#chown cinder:cinder /var/lock/cinder
#chmod 777 /var/lock/cinder
# ls -l /var/lock/
drwxrwxrwx 2 cinder cinder  40 Aug 29 11:05 cinder