Abstract: Diarrheal disease is a common childhood illness and a leading killer of children aged below 5 years old , which accounted for 9% of deaths worldwide in 2015. While in Ethiopia it kills half-million under-five children each year. Sanitation, unsafe water, and personal hygiene are responsible for 90% of the occurrence. Thus, this study aimed to determine the prevalence and associated factors of diarrheal diseases among under-five years old children in Daye District hospital, Sidama Regional State Ethiopia. A hospital based retrospective study was conducted. A face to face interview using a structured questionnaire and observation checklist was used. A total of 302 mothers who have at least one under-five children were selected using simple random sampling techniques. Frequencies and proportions were computed as descriptive analysis. Initially using bivariate analysis a crude association between the independent and dependent variables was investigated. Then , to determine the predictor variables for the outcome variables. Finally, further analyses were carried out using multivariable analysis at a significance level of p-value ≤0.05. The prevalence of diarrhea occurrence was 34.2% and Children in the age range between 6 -24 months were more at risk (AOR=2.58; CI 1.983-6.79). The study found that sources of drinking water and hygiene practices play important role in childhood diarrhea includes river (AOR=0.23;CI.057-.94),hand washing after cleaning the child’s bottom(AOR=3.5;CI1.308-9.54), the more people drink river and untreated water are vulnerable to diarrheal diseases. The children who drink well and pipe as well as treated water with either chlorine or filtering, decrease the risk of having diarrhea. The children who receive Rotavirus 1,2,3 vaccine 34 times minimize the risk of having diarrhea .Also children who exclusively breastfeed 51 times decrease the risk of developing diarrhea than children who were not exclusively breastfed. The prevalence of diarrhea in Daye was still high (34.2%) compared to the 12% of national prevalence rate.Therefore, water should be treated either with chlorine or filtering and mothers should have wash hands water with soap and the government should supply improved water for households to minimize the incidence of diarrhea in the district. The study recommends effective actions to curb the diarrhea prevalence by improving the basic hygiene practices, advice household members to use improved water source and treated by chlorine or boiling water, provision of clean water and the vaccination of the children against rotavirus.