Cognitive impairment and dementia are age-related major public health concerns in the elderly population. It is a major cause of disability, dependency, and poor quality of life. However, in Ethiopia, the magnitude of this cognitive impairment among the elderly community was not investigated. Hence, this study sought to determine the prevalence of cognitive impairment and associated factors among mature and older adults living in the community of Gondar town, Ethiopia, in 2020. A community-based cross-sectional study was conducted at Gondar town, from February 20 to April 30, 2020. Using a single-stage cluster sampling technique, 403 study participants were recruited. Data was collected by a pretested interviewer-administered structured questionnaire which consisting of sociodemographic variables, the Oslo Social Support Scale, and a Standardized Mini-mental State Examination (SMMSE) tool. Epi data version 3.0 was used to enter coded data and then exported into STATA 14 for analysis. Variables with a p-value < 0.25 in the bi-variable logistic regression were included in the multivariable regression. From multivariable logistic regression, variables having a p-value ≤ 0.05 were declared as statistically significant variables. In this study, a total of 403 study participants were involved, and 393 (97.5%) of them completed the survey. Among older participants screened for cognitive impairment, 43.8% was positive for cognitive impairment with a 95% CI (38.8–48.7%). The majority of the participants were (57.5%) male and (44.8%) aged over 60 years. After adjustment, the variables associated with cognitive impairment were age ≥ 75 years [odds ratio (OR) = 7.03, 95% CI 2.78–17.77] and between 61 and 74 years [OR = 3.18, 95% CI 1.81–5.59], and unable to read and write [OR = 5.05, 95% CI 2.04–12.50], low income level [OR = 2.60, 95% CI 1.26–5.20], being female [OR = 2.52, 95% CI 1.50–4.26], poor social support [OR = 2.50, 95% CI 1.30–4.81], and rural residence [OR = 2.39, 95% CI 1.26–4.51]. The prevalence of older participants who screened positively for cognitive impairment was high at Gondar town. The independent predictors of cognitive impairment among older individuals were older age, being unable to read and write, being female, low income, poor social support, and rural dwelling. Therefore, routine screening and social support, as well as free healthcare services for the mature and older community, are needed. Moreover, we strongly recommend the next researcher to use a diagnosis tool to estimate the actual prevalence of the problems among older people.