Background: All of society is affected by mental health problems, not just a minor, isolated part. Mental health problems represent a major challenge to the global development of community health. This study examined the community health knowledge, perceived beliefs, and associated factors of mental distress (MD) in Mekelle city in Northern Ethiopia. Methods: The current study used a cross-sectional approach calculating a sample of 260 adults living in the two sub-cities of Mekelle city. To select the sample households in each sub-city, systematic random sampling was used. Self-reported questionnaire (SRQ-20 with a cutoff point of 7), and Mental Health Knowledge Schedule (MAKS) instruments were included within the structured questionnaire tool to clarify community occurrence and the level of health mental knowledge. Results: The likelihood of having MD was higher among the study participants who were female, employed, self-employed, and daily alcohol and khat users. The results also showed that the level of mental health knowledge among the participants was low. Conclusions: Factors such as being male, having a higher level of education, and having strong levels of social support were found to be the independent predictors of good mental health and community mental health knowledge.