Between February and April 1995, 669 under-five children living in Jimma town were randomly selected and had their nutritional status assessed. Risk factors for protein-energy malnutrition (PEM) were also studied. About half (48%) of the children were found to be malnourished. The prevalence of underweight, wasting and stunting were 36%, 9% and 36%, respectively. Severe protein-energy malnutrition, i.e., marasmus, kwashiorkor and marasmic-kwashiorkor, was detected in 2%. The prevalence of malnutrition was lowest in infants. While underweight and wasting peaked by the second and third years of life, stunting increased dramatically by the second year and peaked in the fifth year. Poor socio-economic background, poor housing condition, non-availability of latrine, "unprotected" water source, an attack of pertussis, not completing immunization, prolonged breast feeding and nutritionally inadequate diet were found to be risk factors for PEM in the bivariate analyses. Multiple logistic regression analyses showed a strong association between PEM and poor housing condition, non-availability of latrine, prolonged breast feeding and diet lacking in animal food. Intervention measures should take the multifactorial causation of PEM into consideration.