Background: In Ethiopia, child malnutrition is one of the most serious public health problem and the highest in the world. This study aimed to assess the magnitude and associated risk factors with undernutrition among preschool children in Hawassa area, South Ethiopia. Methods: A community based cross-sectional study was employed on 358 mother-child pairs of 6-59 month old children from February to March 2012.Weight and height of the selected children was measured and the socio-demographic characteristics of the subjects were collected using a structured interviewed questionnaire. Logistic regression analyses were performed to identify predictors of malnutrition. Result: The prevalence of malnutrition in the community was 43.6% underweight, 53.1% stunted and 28.2% wasted. Conclusion: There was a high prevalence of undernutrition in the study area. Thus, full implementation of the poverty alleviation programmes should be considered and appropriate measures need to be taken to support needy families with children.