Background Mental disorder is one of the greatest challenges that current and future generations will face. Currently among all people suffering from depression, 85% of them live in low- and middle-income countries. Previous studies reported the global burden/prevalence of depression to be five to ten times higher among prisoners than the general population. However, the prevalence of depression among prisoners in our study area is not known. Objective This study therefore aimed to assess the prevalence and associated factors of depression among prisoners in Jimma town in 2017. Method A cross-sectional study design was employed on 332 prisoners selected by systematic random sampling method. Data was collected by a face to face interview using Beck Depression Inventory (BDI-II) scale. Data analysis was done using SPSS version 20. Result The study revealed that 41.9% (n = 139) of participants among prisoners had depression. Having family history of mental illness (AOR = 6.05, 95% CI = 2.6, 13.8), having chronic physical illness (AOR = 2.87, 95% CI = 1.29, 6.41), having history of previous incarceration (AOR = 3.26, 95% CI = 1.02, 10.64), lack of job in the prison (AOR = 4.96, 95% CI = 2.09, 11.8), lifetime alcohol use (AOR = 3.61, 95% CI = 1.8, 7.26), thinking life to be a difficult one after release from prison (AOR = 2.07, 95% CI = 1.2, 3.6), having age between 21 and 25 years (AOR = 2.04, 95% CI = 1.06, 3.89), and having poor social support (AOR = 2.2, 95% CI = 1.27, 3.82) had significant association with depression in the fully adjusted final regression model. Conclusion This study has shown that the prevalence of depression among prisoners was very high. Having family history of mental illness, having chronic physical illness, having previous incarceration, lack of job in prison, lifetime alcohol use, thinking life to be difficult one after release from prison, having age between 21 and 25 years old, and having poor social support were found to have an impact on the prevalence of depression.