Background Anemia during childhood adversely affects mental, physical and social development of the children. This study is aimed to assess the prevalence of anemia and its associated factors among children less than five years of age in Guguftu, South Wollo, Northeast Ethiopia. Method A cross-sectional health facility based study was conducted among 404 children aged 6 to 59 months. Systematic random sampling technique was used to include the participants. Pretested and structured questionnaires were used to collect socioeconomic and demographic characteristics of the family and child. Data on nutritional status, capillary blood and stool samples were collected from each child. Multivariate logistic regression was used to calculate adjusted odds ratios and the corresponding 95% confidence intervals. Result The overall prevalence of anemia was 41.1% (95% CI;36.6% - 45.8%). Of the anemic under five children, 112 (67.5%) had mild anemia, 52(31.3%) had moderate anemia, and 2(1.2%) had severe anemia. Children who were in the age group of 6–11(AOR = 4.52; 95% CI: 1.67–12.34) and 12–23 (AOR = 2.79; 95% CI: 1.04–7.51) months, living in an urban (AOR = 1.83; 95% CI: 1.05–3.18), with no formal education mothers (AOR = 7.05; 95% CI: 2.93–17.01) and primary education mothers (AOR = 3.26; 95% CI: 1.29–8.24), with a family monthly income of <750 ETB(AOR = 5.19; 95% CI: 1.24–21.75) and 750–1500 ETB(AOR = 5.89; 95% CI: 1.45–23.98), with early (<6 months) introduction of complementary foods (AOR = 3.53; 95% CI: 1.23–10.18), Underweight (AOR = 2.11; 95% CI: 1.21–3.69) were more likely to become anemic. Conclusion This study has revealed that the prevalence of anemia in children less than five years is high and a severe public health problem in the study area. Therefore, the policymakers should make a strategy that can reduce poverty and increase the awareness of women on breastfeeding, nutrition, and other associated factors to reduce anemia.