Objectives: To determine the prevalence of alcohol use disorder and associated factors among residents of Dilla town, Gedeo zone, Southern Ethiopia, 2021. Methods: A community-based cross-sectional study was conducted among 666 randomly selected participants. Interview-assisted structured questionnaire was used to collect data, and alcohol use disorder identification test was employed to measure alcohol use disorder. The data were entered in to Epi info version 7 and exported in to SPSS version 25 for analysis. Both bivariate and multivariate binary logistic regression analysis were used to identify significant factors related with alcohol use disorder. In the multivariate model, variables with p value < 0.05 were considered as a statistical significant factor for the outcome variable. Finally, adjusted odds ratio with 95% confidence interval was computed to assess the strength of association. Results: The magnitude of alcohol used disorder during the past year was 30.6% (95% confidence interval: 25.5%–35.7%). Being male (adjusted odds ratio = 8.33, 95% confidence interval: (4.34, 15.98)), age of less than 33 years old (adjusted odds ratio = 1.78, 95% confidence interval: (1.06, 3.00)), current cigarette smoking (adjusted odds ratio = 2.49, 95% confidence interval: (1.42, 4.37)), current khat chewing (adjusted odds ratio = 6.23, 95% confidence interval: (3.8, 9.92)), high level of psychological distress (adjusted odds ratio = 7.69, 95% confidence interval: (4.16, 14.28)) and poor social support (adjusted odds ratio = 2.30, 95% confidence interval: (1.27, 4.18)) were significantly associated with alcohol use disorder. Conclusion: A large percentage of respondents in our sample had an alcohol use disorder. Alcohol use problems were linked to being men, under the age of 33 years old, current khat chewing, current cigarette smoking, a high level of psychological distress, and poor of social support. As a result, early screening, public health intervention programs and establishing appropriate referral linkages with mental health facilities are recommended.