Giardiasis is a protozoan disease caused by the parasite Giardia lamblia. Around 200 million people are infected worldwide annually while, 500,000 deaths were reported each year. The infection rates were between 2–5% in the developed nations and 20–30% in the developing countries. The parasite is associated with poverty, poor sanitation, lack of clean and safe drinking water supply, and poor personal hygiene. The aim of our study was to assess the prevalence rate and associated risk factors of G. lamblia infection among the elementary school children at Loka Abaya town, Ethiopia. A cross-sectional study was conducted from December 2018 to July 2019. A total number of 422 students were selected by using simple random sampling. Structured and semi-structured questionnaire was used to identify known risk factors such as environmental, socio-demographic, and behavioural. Stool specimens were collected from the study subjects and examined using direct smear method, microscopically. A bivariate and multivariate logistic regression analysis was done. P value less than 0.05 at 95% of the confidence interval was considered statistically significant. The overall prevalence rates of G. lamblia infection were 27.1%. Rural school from Aregeda [AOR: 9.997, P = 0.005], age group of 6–9 years [AOR: 2.305, P = 0.019], consuming tap water [AOR: 0.011, P = 0.006], hand washing habit after defecation with water only [AOR = 0.313, P = 0.040], use of soap and water [AOR: 0.046, P = 0.000] were the factors which are found to be associated with the parasite infection when compared to urban school. As such, the prevalence of G. lamblia infection was found to be high in the studied area among school children. Thus, scaling-up of access to safe water, toilets, education, and health facilities are required to possibly eradicate this predicament.