Background Malaria kills millions around the world. Until recently it was believed to be a disease of rural areas, since the Anopheles mosquito, which transmits Plasmodium species breeds in rural areas. Urban malaria is emerging as a potential, but "avertable" crisis, in Africa. In view of the rapidly growing number of small and medium-sized towns in Ethiopia there is a pressing need to improve the understanding of the epidemiology of malaria. Therefore, the aim of this study was to determine malaria prevalence and associated risk factors in Jimma town. Methods A cross-sectional study was carried out in Jimma town from April 1 to May 28, 2010. 804 study participants were included from 291 households for microscopic examination of malaria parasites. Socio-demography data and risk factors were collected using structured questionnaires. Logistic regression analysis was done using SPSS 15.0 statistical software. Results From a total of 804 study participants in current survey only 42 (5.2%) were positive for malaria parasites. Plasmodium vivax, Plasmodium falciparum and mixed infection accounted 71.4%, 26.2% and 2.4%, respectively. Higher malaria prevalence rate was observed among under-five children (11%). Those who do not use insecticide-treated bed nets (ITN) were more likely to be infected with malaria (OR = 13.6; 95% CI 4.9-37.2, p < 0.001) compared with those who use the ITN. Living in areas where stagnant water existed (OR = 2.1; 95% CI 1.00-4.2, p = 0.047) and its distance of existence