Introduction Perinatal asphyxia continues to be a significant clinical concern around the world as the consequences can be devastating. World Health Organization data indicates perinatal asphyxia is encountered amongst 6–10 newborns per 1000 live full-term birth, and the figures are higher for low and middle-income countries. Nevertheless, studies on the prevalence of asphyxia and the extent of the problem in poorly resourced southern Ethiopian regions are limited. This study aimed to determine the magnitude of perinatal asphyxia and its associated factors. Methods A retrospective cross-sectional study design was used from March to April 2020. Data was collected from charts of neonates who were admitted to NICU from January 2016 to December 31, 2019. Result The review of 311 neonates’ medical records revealed that 41.2% of the neonates experienced perinatal asphyxia. Preeclampsia during pregnancy (AOR = 6.2, 95%CI:3.1–12.3), antepartum hemorrhage (AOR = 4.5, 95%CI:2.3–8.6), gestational diabetes mellitus (AOR = 4.2, 95%CI:1.9–9.2), premature rupture of membrane (AOR = 2.5, 95%CI:1.33–4.7) fetal distress (AOR = 3,95%CI:1.3–7.0) and meconium-stained amniotic fluid (AOR = 7.7, 95%CI: 3.1–19.3) were the associated factors. Conclusion Substantial percentages of neonates encounter perinatal asphyxia, causing significant morbidity and mortality. Focus on early identification and timely treatment of perinatal asphyxia in hospitals should, therefore, be given priority.