Sub-Saharan Africa as a region accounts for the bulk of the global under-five mortality rate, to which diarrhea is major contributor. Millions of children die from diarrheal diseases each year and those who survive often do so facing suboptimal growth. Preventing the common pathways of transmission for diarrhea-causing pathogens, including improved water, sanitation, and hygiene (WASH) are regarded as the most cost-effective measures for tackling this life-threatening disease. This study aimed to quantitatively assess the quality of living arrangement and access to WASH, and their impact on diarrheal outcomes among under-five children in Nigeria. Methods: Data were collected from the 2013 Nigeria Demographic and Health survey (NDHS). Study participants included 28,596 mother-child pairs. Household construction material for wall, floor, and ceiling, access to electricity, and improved water and toilet, were included as the main explanatory variables. Data were analyzed using descriptive and multivariable regression methods. Results: The prevalence of diarrhea was 11.3% (95% CI = 10.2–12.6), with the rate being markedly higher in rural (67.3%) as compared to urban areas (32.7%). In the regression analysis, lacking access to improved toilet and water facilities were associated with 14% and 16% higher odds, respectively, of suffering from diarrhea as compared to those who had improved access. Conclusion: There is evidence of a weak, but statistically significant, relationship between the quality of living environment, including water and sanitation facilities, and diarrhea among under-five children in Nigeria. The study concludes that investing in living conditions and WASH may have potential benefits for child mortality prevention programs in the country.