Introduction: Diarrhea is a major cause of morbidity and mortality in children under-five in Sub- Saharan Africa including Ethiopia. In Ethiopia, several studies were done to assess factors associated with diarrhea. However, they were specified to a certain area, focused only on the influence of singlelevel factors and the multilevel study conducted also lacked evidence on the effects of latrine and hand washing facility. Objective: This study aimed to identify factors associated with diarrhea at the individual and community level among children under-five in Ethiopia. Methods: The source of data for this study was the Ethiopian demographic and health survey 2016, which was a cross-sectional study, employed a multistage stratified cluster sampling technique to select study participants. In this study, a total of 10,006 children under-five living in 643 clusters were included. The multilevel binary logistic regression model was used to identify significant factors of diarrheal illness. Result: Twelve percent of children under-five were suffered from diarrhea. At individual level; Low birth weight [AOR=1.51, 95% CI=1.26, 1.80], underweight [AOR=1.34, 95% CI=1.12, 1.60] and mother employment [AOR=1.30, 95% CI=1.10, 1.54], bottle feeding [AOR=1.32, 95% CI=1.08-1.62] and child age 6-11 months [AOR=4.60, 95% CI=3.22, 6.57] ), 12-23 months [AOR=4.18, 95% CI=3.05, 5.72], 24-35 months [AOR=2.80, 95% CI=2.10, 3.74] were significantly associated with diarrheal illness. The region SNNPR [AOR=1.81, 95% CI=1.01, 3.25] and Gambela [AOR=1.89, 95% CI=1.02, 3.47] was a significant factor of diarrhea illness at the community level. Conclusion: The prevalence of diarrhea was almost 12%.Children aged less than 47 months, underweight, children with smaller than average birth size, children from employed mothers, children with bottle feeding practice and children living in SNNPR and Gambela were found with increased risk of diarrheal illness. Hence, efforts like provision of health education, Strengthen community based nutritional programs, avoid bottle feeding and developing an intervention strategy that considers age of children are needed to prevent and reduce diarrhea among children under-five.