Facility layout design refers to the physical place or surrounding where services take place. It is a visual metaphor that acts as package (in the same way as product package) to convey or express an organization’s image. The elements of facility layout design comprises of the ambient conditions, spatial layout and functionality, artifacts, signs and symbols and the social elements. Service organizations customers have become more demanding with an ever growing expectation not only in regard to quality of service but also the surrounding where these services are offered. Minimal studies have focused on facility layout design and those that did so mainly focused on health provider perspective and medical material perspective. This study had two objectives the first objective was to establish the extent to which elements of facility layout design are considered by Dire Dawa hospitals and secondly to find out the effect of facility layout design on health service quality at Dire Dawa hospitals. The study used descriptive cross-sectional survey design and the population of the study comprised of patients and visitors (attendants). Questionnaire was used to collect data and the response rate was 96.9 %. From this study, most of the elements of facility layout design were not adopted to patients and visitors but in average facility layout design was adopted by study participants. Social elements was highly ranked followed by Spatial Layout and Functionality, third was the ambient conditions and lastly artifacts, sign and symbols was the least adopted. The study also showed a positive relationship between facility layout design and health service quality which was stastically significant. The study thus recommends that the management should invest more on a good facility layout design as it affects customers" perception on hospitals’ service quality.