Background: The COVID-19 pandemic affects the public overall psychological status including anxiety. Assessing the perceived risk and preventive behaviors and COVID-19induced anxiety of every individual is crucial to be more effective in handling the outbreak. Purpose: This study intends to determine the status of perceived risk, preventive behavior, and induced anxiety regarding COVID-19 among urban residents in Ethiopia. Methods: In this research a population-based, cross-sectional design was employed among 801 urban residents in West Shewa Zone, Ethiopia from June to October 2020. COVID-19 Induced Anxiety Scale (CIAS) was used, with CIAS score ≥80% taken as having anxiety. A Preventive Behavior towards COVID-19 Scale (PBCS) was used to measure the level of protective behavior. The data were gathered using CS Entry and analyzed with SPSS version 23.0. Basic descriptive analysis was conducted, and binary logistic regression analysis was carried out to determine the predictors associated with anxiety. Results: Most of the study population, 716 (89.4%), had moderate risk perception, and around 497 (62.0%) of them had moderate preventive behavior against the pandemic. The proportion of COVID-19-induced anxiety disorder was found to be 18.1%. The identified predictors associated with COVID-induced anxiety were: being widowed (AOR=3.5; 95% CI: 1.7-7.6), lacking formal education (AOR=1.9; 95% CI: 1.3-3.3), having history of psychoactive substance use (AOR=3.0; 95% CI: 1.6-5.8), high protective behavior (AOR=2.2; 95% CI:1.5-3.3), low perceived risk (OR=3.7; 95% CI: 1.5-12.4), and family history of mental illness (AOR=1.6; 95% CI:0.7-3.8). Conclusion and Recommendation: COVID-19-induced anxiety prevalence was 18.1%. Risk perception regarding COVID was moderate. However, only 38.0% of the population had high preventive behavior against the pandemic. Hence, it is important to provide the continuous public health education necessary to promote preventive measures and minimize risky behaviors. Basic psychosocial help should be also provided for individuals suffering with COVID-19-induced anxiety.