Background: The aim of this study was to investigate the magnitude and associated factors of alcohol use disorder among the elderly living in 3 towns in South West Ethiopia. Method: Cross-sectional community-based study was done among 382 elderly people aged 60 or more from February to March 2022 in South West Ethiopia. The participants were selected by a systematic random sampling method. Alcohol use disorder, quality of sleep, cognitive impairment, and depression were assessed by using AUDIT, Pittsburgh Sleep Quality Index, Standardized Mini Mental State Examination, and geriatric depression scale, respectively. Also, suicidal behavior, elder abuse, and other clinical and environmental factors were assessed. The data was entered into Epi Data Manager Version 4.0.2 before being exported to SPSS Version 25 for analysis. A logistic regression model was used, and variables with a P-value less than .05 in the final fitting model were stated as independent predictors of alcohol use disorder (AUD). Result: The magnitude of alcohol use disorder, current alcohol use, and life-time alcohol use among the elderly was 27.5%, 52.4%, and 89.3%, respectively. Also, 7%, 23%, 8.9%, and none of the elderly had nicotine, khat, inhalants, and cannabis use disorder, respectively. Furthermore, AUD was associated with cognitive impairment (AOR, 95% CI; 2.79 (1.47-5.30)), poor sleep quality (AOR, 95% CI; 3.27 (1.23-8.69)), chronic medical illness (AOR, 95% CI; 2.12 (1.20-3.74)), and suicidal ideation (AOR, 95% CI; 5.27 (2.21-12.60)). Conclusion: Problematic alcohol use was higher among the elderly, and cognitive impairment, poor sleep quality, having chronic medical illness, and suicidal ideation were risk factors for AUD. Therefore, community level screening for AUD and comorbid risk factors among this particular age group and managing them is crucial to prevent further complications due to AUD.