Introduction: Many women lose their lives in the process of giving life. Maternal mortality remains high in the developing world. This study was conducted to assess institutional delivery service utilization and associated factors in Banja District, Amhara region, Ethiopia, 2013. Methods: A community-based cross-sectional study was conducted among mothers who gave birth in the last two years prior to the study in Banja District from June to July 2013. Multistage sampling technique was used to select the total of 394 study participants. Data were collected by means of a pretested standardized questionnaire. Analysis was carried out by using SPSS version 16. Crude and adjusted odds ratio with 95% confidence interval was calculated by using binary logistic regression. p-value less than 0.05 was considered as statistically significant. Results: The study indicated that only 15.7% of the respondents delivered in health institution. Age of mothers 15-24 years, educational status of the mothers with secondary and above, the existence of educated family members, mothers with previous experience with institutional delivery and mothers' Knowledge on the danger signs of labor were significantly associated with institutional delivery service utilization at p-value less than 0.05. Conclusions: Institutional delivery service utilization in the study area was low (15.7%). Therefore, policy makers, health planers and programmers should recognize determinants of institutional delivery service utilization. More efforts should be given to educate mothers and families. Previous experience sharing and knowledge transfer will be crucial to bring expected institutional delivery utilization.