The incidence of a diabetic foot ulcer (DFU) is increasing over the previous decade with an increasing prevalence of diabetes mellitus (DM). Despite the increasing incidence of DFU, there is limited information about the problem in Ethiopia. Hence, this study aimed to investigate the incidence of DFU and its predictors among newly diagnosed DM patients who were on follow-up at Felege Hiwot Referral Hospital. Methods: Institution-based retrospective follow-up study was conducted at Felege Hiwot Referral Hospital among newly diagnosed DM patients from January 1, 2009, to December 31, 2018. A simple random sampling method was used to select 401 study participants from a total of 723 eligible population. Data was entered using Epi-Data version 3.1 and exported to STATA version 14 for analysis. The incidence rate was estimated using person-years of observation and Nelson-Aalen cumulative hazard function, showing the cumulative probability of diabetic foot ulcer, was done. The best model (Gompertz) was selected using the AIC and log-likelihood method. Hazard ratio (HR) with its 95% confidence interval was computed and variables having a p-value less than 0.05 in the multivariable model were considered to be significantly associated with DFU. Results: A total of 387 patients were followed retrospectively for a median follow-up time of 95 months. Out of all, 66 (17.05%) patients developed DFU with an incidence rate of 4 cases per 100 person-years of observation. Diabetic nephropathy (adjusted hazard ratio (AHR) = 2.37, 95% CI: 1.33-54.24), diabetic retinopathy (AHR = 5.56, 95% CI: 2.64-11.74), and increased body mass index (AHR = 1.13, 95% CI: 1.01-1.27) were found to increase the hazard of DFU. Conclusion: The incidence of DFU was relatively high. Diabetic nephropathy, diabetic retinopathy, and body mass index were its significant predictors. Therefore, close monitoring of patients with co-morbidities and increased body mass index should be considered to reduce DFU.