Worldwide, ten and a half million children under five die every year, with 98% of these deaths in low- and middle-income countries, including Ethiopia. Undernutrition is a serious public health problem in Ethiopia and children are the most affected segments of the population. This study, therefore, sought to investigate the socio-economic, demographic, health and environmental factors associated with undernutrition among children aged 6–59 months in Ethiopia. Data were obtained from the 2016 Ethiopian Demographic and Health Survey. In this study, anthropometric data (height and weight) and other variables of 9461 children were measured. Descriptive statistics and multilevel logistic regression models were fitted. The descriptive results revealed that about 27.5% of the children aged between 6–59 months were undernourished. Place of residence, employment status of the mother, educational status of the mother, the mother’s nutritional status, age of the child, birth order of children, source of drinking water, diarrhea and fever among children in the two weeks before the survey were the most important factors associated with undernutrition among children aged 6–59 months in Ethiopia. The findings indicate that it is useful to support health care and food security programs in rural areas to directly address food insecurity and undernutrition problems of the poor and exposed communities in rural parts of the country. The education sector must increase mothers’ access to education in all areas to help identify the quality of healthcare and the required attention needed for their children. The health sector should increase their health education programs on the importance of exclusive breastfeeding.