The first year after a woman has given birth is critical for use of contraceptives although many women do not realize that they are at a risk for pregnancy. The main objective of this study was to assess the utilization of modern Postpartum Family Planning (PPFP) and associated factors among postpartum women in a rural district, Ethiopia. A cross-sectional study involving randomly selected 389 postpartum women was conducted in Ambo rural district from May 20, 2021 to June 10, 2021. Data were collected through face to- face interviews, entered into EPI Data version 3.1, and analyzed by SPSS version 25.0. In multivariable binary logistic regression, adjusted odds ratios (AOR) with 95% confidence interval (CI) were computed and statistical significance was declared at p < 0.05. The prevalence of modern PPFP was 72.5% (95% CI: 68%, 77%). Utilization of PPFP was significantly associated with women’s self decision making (AOR = 6.43, 95% CI: 1.98, 20.90), counseling during antenatal care (AOR = 9.71, 95% CI: 3.83, 24.61), visit health facility after delivery (AOR = 5.24, 95% CI: 2.32, 11.84), ever heard of modern family planning (AOR = 5.17, 95% CI: 1.88, 14.23), perceived partner approval (AOR = 4.31, 95% CI: 1.62, 11.47), and the lowest income (AOR = 0.12, 95% CI: 0.02, 0.68). The use of modern PPFP in the study area was encouraging, which helps to prevent unplanned and unwanted pregnancies and spacing pregnancies. Therefore, family planning providers should focus on raising women’s awareness and counseling their partners as part of a continuum of points of contact to encourage women to use the service.