Background: Despite the advance in drug development and availability of dozens of drugs in the healthcare system today, knowledge of patients about dispensed medicines is poor to the extent suppositories are being swallowed by patients. The size of commonly used paper envelopes for labeling in Ethiopia doesn't even allow writing the required drug information on it. Methods: Direct observation supported cross-sectional study was conducted to assess the extent of patients' misunderstanding of dosage instructions and associated factors among patients attending Kenema Pharmacy Number 09 at Addis Ababa by using a pre-specified structured interview questionnaire.Result: A total of 398 patients were included in the study and 62.81% were female. Around 34.42% of respondents were found to be in the age range of 25 to 34 years. Two hundred eighty-eight (72.36%) of participants misunderstood one or more dosage regimen instructions, and 269(67.59%) misunderstood the frequency of drug administration. The most commonly misunderstood medications were antibiotics. Moreover, from medication label observations, 273 (68.25%) were dispensed without a medication label. Patient misunderstanding of dosage instructions was significantly associated (p< 0.001) with age, residence, and educational level. Conclusion: A significant number of patients misunderstood dosage regimen instructions. The majority of drugs were dispensed without label information and pharmacists did not practice the 'tell me back if you know, principle to ensure understanding of communicated information. Age, educational status, sex, and residence of patients were significantly associated with patient misunderstanding of dosage instructions. Therefore, pharmacy professionals should appropriately label, and effectively communicate to ensure patient understanding of the dosage instructions for the patient before dispensing. Future studies involving multiple sectors should be done to identify the ranges of associated factors with patients' misunderstanding of dosage instructions and patientdispenser communication optimization.