Background: Coronaviruses are a large family of viruses that cause a wide range of illness from the common cold to more severe diseases. The COVID-19 pandemic is a public emergency of international concern that affects several nations. The widespread outbreak of COVID-19 virus has brought not only the risk of death but also major psychological pressure. However, the psychological impact on university students has not been studied in Ethiopia. Objective: To assess the psychological impacts of COVID-19 pandemic among university students in Bench-Sheko Zone, Southwest , Ethiopia, 2020. Methods: A community-based cross-sectional study was conducted from May 15 to June 15/2020. A systematic sampling technique was employed to select the study participants. The data were entered into EpiData 3.1 and exported to SPSS version 24 for analysis. Bivariate and multivariable logistic regression were used to identify candidates and independent factors respectively. Independent factors of depression, anxiety, and stress were assessed using AORs with 95% confidence level at P-value <0.05 cut point. Results: Three hundred and twenty-two university students were included with a 97.5% response rate. The prevalence of depression, anxiety, and stress was 21.2%, 27.7%, and 32.5%, respectively. Being female, staying at home, history of medical illness, and poor and moderate social support increased the risk of depression. Not living with their parents, relatives got coronavirus and low family income were risk factors for anxiety. Moreover, substance use, depression, anxiety, and poor social support were increasing the risk of stress among university students. Conclusions and Recommendations: This study revealed a higher prevalence of depression, anxiety, and stress among university students. Thus, governments and policy makers should develop health system strategies to provide crisis-oriented psychological services for university students to minimize the mental health impact of the outbreak.