Ethiopia faces a significant challenge with increasing non-communicable diseases like diabetes, ranking among the top four in sub-Saharan Africa. However, there is a lack of research on how lifestyle affects chronic complications of diabetes in Ethiopia, highlighting the need for urgent exploration to develop better intervention strategies. This study aimed to evaluate the link between lifestyle factors and chronic complications of diabetes in public health hospitals in Southwest Ethiopia. A cross-sectional study involving 389 diabetes patients from Mizan-Tepi University Teaching Hospital (MTUTH) and Gebretsadik Shawo General Hospital (GSGH) in Southwest Ethiopia was conducted. Data collection methods included interviewer-administered questionnaires, patient medical record reviews, physical examination, and serum analysis. SPSS version 25 was used for data analysis, including descriptive statistics and bivariate and multivariate logistic regression analyses. Statistical significance was determined at a p-value < 0.05. The study revealed a 32.1% prevalence of chronic complications of diabetes, with 13.4% having chronic kidney disease, 8.0% experiencing visual disturbances, and 16.7% suffering from peripheral sensory pain. After adjusting for confounding variables, age (41-60 years [AOR = 1.77; 95% CI 1.01, 3.15] and > 60 years [AOR = 2.18; 95% CI 1.20, 4.33]), duration of diabetes mellitus (> 6 years [AOR = 2.90; 95% CI 1.74, 4.85]), alcohol consumption [AOR = 2.30; 95% CI 1.33, 3.98], physical inactivity [AOR = 2.43; 95% CI 1.38, 4.27], and body mass index (underweight [AOR = 7.66; 95% CI 1.68, 34.8] and obese [AOR = 3.53; 95% CI 1.84, 10.5]) were significantly associated with chronic complications of diabetes. Chronic complications of diabetes are a major problem in the study area. Lifestyle factors strongly influence chronic diabetes complications, highlighting the importance of preventive measures. Implementing health education and prevention programs focusing on modifiable lifestyle factors is crucial.