Background: Psychological distress is broadly defined as a state of emotional suffering characterized by symptoms of depression and anxiety combined by other somatic symptoms like; insomnia, headaches, and lack of energy that is likely to vary across different areas. Therefore, this study aimed at assessing the prevalence of psychological distress and its’ associated factors among nurses in public hospitals, Southwest Ethiopia, 2017/18.Method: An institutional-based cross-sectional study was conducted in public hospitals, Southwest Ethiopia from February 1st, 2018 to April 1st, 2018. The total number of nurses who fulfill the inclusion criteria were enrolled. Data was collected using the predesigned tool like Self-Reporting Questionnaire version 20 (SRQ 20). Data were entered using EPI INFO version 7 and was exported to statistical packages for social science (SPSS) version 21.0 for analysis. Bivariate and multivariate logistic regression was employed and odds ratio with 95% confidence interval was used to assess the degree of association between variables. Variables with a P-value of less than 0.05 were considered as statistically significant.Result: A total of 282 eligible nurses were enrolled in the study with mean age of 28.71 [SD ±7.047]. The prevalence of psychological distress among nurses was 78(27.7%). Predictor variables like; job title [AOR= 10.13, 95% CI (1.85, 55.41)], work experience [AOR= 4.98, 95% CI (1.59, 15.568)], interaction with staffs [AOR= .305, 95% CI (.117, .796)], fatigue [AOR= 2.54, 95% CI (1.072, 6.02)], social support [AOR= .189, 95% CI (.075, .474)], perfectionism [AOR= 5.697, 95% CI (1.449, 22.39)] and insomnia [AOR= 3.82, 95% CI (1.52, 9.579)] were found to be strong predictor variables for psychological distress.Conclusion: This study revealed that a considerable proportion of nurses had psychological distress. Therefore, strong social support, upgraded working status, and good interaction with staff should be encouraged among nurses working in the health setting to cope up with different stressors.