Stunting is a public health issue of global concern. Despite, poor sanitation, diarrhea, parasitic infections, and environmental enteric dysfunction (EED) are associated with stunting, their link is poorly understood and has not been investigated in Ethiopia. This study was conducted to assess the associations of stunting with sanitation, enteric infections, and EED among children aged 24–59 months in rural northwest Ethiopia. A community-based cross-sectional study was conducted among 224 randomly selected children aged 24–59 months in rural areas of the east Dembiya district. We collected information on household food insecurity and dietary diversity using pre-tested questionnaires adopted from the food and nutrition technical assistance (FANTA) project. We used height-for-age-z score (HAZ) to define stunting. We also used the data collected to measure the environmental exposures of children to intestinal parasitic infections and fecal biomarkers of EED. A multivariable binary logistic regression model was used to assess the association of stunting with sanitation, enteric infections, and EED. Of the 224 children, 33% (95% CI 27, 39%) were stunted. Stunting in children was significantly associated with poor dietary intake (AOR 3.0, 95% CI 1.2, 7.3), open defecation practice (AOR 3.0, 95% CI 1.2, 7.9), presence of animal excreta in the living environment (AOR 3.4, 95% CI 1.2, 9.9), E. coli contamination of drinking water (AOR 4.2, 95% CI 1.1, 15.3), diarrheal disease incidence (AOR 3.4, 95% CI 1.5, 7.7), intestinal parasites in children (AOR 3.3, 95% CI 1.3, 8.8), and higher EED disease activity scores (AOR 2.9, 95% CI 1.2, 6.7). One-third of the children in the study area were stunted and this high prevalence of stunting was associated with poor dietary intake, poor hygiene and sanitation conditions, enteric infections, and EED. Thus, stunting can be prevented by improving sanitation and hygienic conditions to prevent repeated enteric infections in children and by promoting dietary diversity of children.