Objectives: The study was premised on the notion that insecticide-treated mosquito nets are positively related to malaria prevalence, and that knowledge mediates the relationship between insecticide-treated mosquito nets and malaria. Furthermore, household income was hypothesized to have a moderating effect on the direct and indirect relationships (through malaria knowledge) between insecticide-treated mosquito nets and the prevalence of malaria. Methods: The hypothesized relationships were examined using panel data collected from ten regions of Ethiopia during 2011-2015. Structural equation modeling and the random effect model were used to test the hypotheses. Statistical analyses were performed using Stata version 13.0. Results: The results were consistent with our proposed hypotheses, showing a significant relationship between the research variables. The findings suggest that malaria knowledge contributes to improving the relationship between insecticide-treated mosquito nets and malaria prevalence. A positively significant indirect effect (β = 0.47, p = 0.003) as well as direct effect (β = 0.28, p = 0.001) was revealed in the study. Furthermore, a positive impact of household income in strengthening the relationship between insecticide-treated mosquito nets and malaria through knowledge was reported, with a considerable value (β = 0.13, p = 0.000). The result also reveals differences in the outcome of malaria prevalence at different levels of household income category, where the indirect effect of insecticide-treated mosquito nets on malaria prevalence via malaria knowledge was positive and significant for households under the second-level income category (β = 0.15, p = 0.000). Conversely, the indirect effect of insecticide-treated mosquito nets on malaria prevalence via malaria knowledge was negative for the high level-income category (β = -0.14, p = 0.022). Besides, insignificant and negative relationships were reported for households under low-level income categories (β = 0.024, p = 0.539). Conclusion: The findings are potentially useful for the health sector to ensure success in infectious disease prevention and control, particularly malaria, and to explain how various factors contribute to the relationship.