ABSTRACT: BACKGROUND:Pneumonia is a leading cause of morbidity and mortality among children under five years of age in developing countries, including Ethiopia. However, data on this serious illness among highly susceptible and vulnerable children living in local peri-urban areas are limited. Establishing the prevalence of pneumonia and identifying the associated factors are important for proper planning and intervention. METHODS:A community-based cross-sectional study was conducted among 560 systematically selected children under the age of five years in peri-urban areas of Dessie City from January through March 2019. Data were collected using a pretested structured questionnaire, physical examination of children and direct observation of housing conditions. Pneumonia was examined using World Health Organization (WHO) guidelines as the presence of the symptoms of fast breathing or indrawn chest with or without fast breathing during the two weeks prior to the study. A principal component analysis was used to construct a household wealth index. Data were analyzed using a binary logistic regression model at 95%CI (confidence interval). The analysis involved estimating the crude odds ratio (COR) using bivariate analysis, and adjusted odds ratio (AOR) using multivariable analysis. From the multivariable analysis, variables at p-value of less than 0.05 were declared statistically significant. MAIN FINDINGS:The prevalence of pneumonia among children under five was 17.1% (95%CI: 13.9%-19.9%). Of the participating children, 113 (21.0%) had a cough, 92 (17.1%) had fast breathing, 76 (14.1%) had fever, and 40 (7.4%) of the children had chest indrawn. Domestic fuel was the most common source of cooking fuel 383 (71.1%). Majority 445 (82.6%) of children were fully vaccinated and 94 (17.4%) were not fully vaccinated. Most (481, 89.2%) of the children were got exclusive breastfeeding. Slightly more than half (284, 52.7%) of the under-five children had acute malnutrition and 27.1% of the children had a childhood history of ARI. The multivariable analysis showed using domestic fuel as the energy source for cooking (adjusted odds ratio [AOR] = 3.95, 95%CI: 1.47-10.62), cooking in the living room (AOR = 6.23; 95%CI: 1.80-21.68), overcrowding (AOR = 3.37, 95%CI: 1.56-7.27), child history of acute respiratory infection (ARI) (AOR = 6.12 95%CI: 2.77-13.53), family history of ARI (AOR = 4.69, 95%CI: 1.67-13.12) and acute malnutrition (AOR = 2.43, 95%CI: 1.18-5.04) were significantly associated with childhood pneumonia. CONCLUSION:In this study, pneumonia remains a leading public health problem among under five children in the study area and higher than national averages. Domestic fuel as the energy source for cooking, cooking in the living room, overcrowding, child history of ARI, family history of ARI and acute malnutrition were predictors of pneumonia. Community-based interventions focusing on improving housing conditions, reduced use of domestic biofuels, adequate and balanced food intake, including exclusive breastfeeding of infants, and early treatment of ARIs.