The study was conducted during September, 2008 to 2009 in East Showa Zone, Akaki district to determine the prevalence of mastitis, identify risk factors, isolate and identify major bacterial causes and conduct in-vitro antimicrobial susceptibility test. Forty six (46) small holder dairy farms and 200 dairy cows were selected by one stage cluster sampling. Questionnaire survey, farm inspection and clinical examination of cows were used to collect data. Milk samples which were positive on california mastitis test (CMT) was collected aseptically using sampling bottles and transported to veterinary microbiology laboratory at Addis Ababa University, Faculty of veterinary medicine for bacteriological study. The prevalence of clinical mastitis at herd, cow and quarter level accounted 17.3, 3.0 and 1.2%, respectively whereas 60.8% herd, 25.0% cow and 12.7% at quarter level during subclinical mastitis. Major bacterial isolates in subclinical mastitis include Staphylococcus aureus (38.9%), coagulase negative Staphylococcus (23.4%), Bacillus spp. (10.4%), Escherichia coli (7.8%), Streptococcus agalactiae (6.5%), Streptococcus dysgalactiae (1.3%), Staphylococcus uberis (1.3%) and Staphylococcus intermidius (5.2%). Likewise during clinical mastitis, S. agalactiae and S. aureus accounted (33.3%) and (22.2%), respectively. Univariate logistic regression indicated that stage of lactation, parity number, teat lesion and milking mastitic cow at last had significant effect (p < 0.05) on prevalence of mastitis. The in vivo antimicrobial sensitivity tests showed that gentamicin, kanamycin, chloramphenicol and vancomycin were the most effective antibiotics, followed by streptomycin and penicillin; bacitracin, polymxin and amoxicillin were least effective drugs.