Small ruminants are vital to the economy of Ethiopia and significantly contribute to the livelihoods of resource-poor farmers. However, poor management practices and high mortality rates among young lambs and kids have hindered their economic potential. A prospective cohort study was conducted in three rural villages in Dalocha district with the aim of estimating morbidity and mortality rates among these animals and identifying associated risk factors. The study monitored 130 lambs and kids every 15 days from birth to three months and recorded health events and deaths. Data analysis utilized Kaplan‒Meier survival analysis, log-rank tests, and multivariate Cox proportional hazard regression. The results revealed an overall morbidity rate of 0.58 and a mortality rate of 0.2 cases per 100 lamb days at risk for lambs, whereas the rates of morbidity and mortality for kids were 0.27 and 0.1 cases per 100 kid days, respectively. Respiratory issues were the leading health problem, accounting for 35.9% of morbidity cases, whereas diarrhea accounted for 38.5% of deaths. The hazard of morbidity was 2.1 times greater for lambs than for kids (HR = 2.1; p = 0.039). Additionally, the morbidity hazard was significantly greater in lambs and kids from multiparous dams (HR = 3.8, p = 0.017) but 89% lower in vaccinated flocks (HR = 0.11, p = 0.001). The identified risk factors for mortality included litter size and maternal behavior. Twin-born lambs and kids presented a mortality hazard that was 6.31 times greater than that of singletons (HR = 6.31; p = 0.025), whereas offspring from dams with poor mothering presented a mortality hazard that was more than 24 times greater (HR = 24.56; p = 0.006) than that of offspring from normal mothers. This study underscores the need for improved maternal care, access to colostrum, better bonding, and suitable environments for multiple births to reduce morbidity and mortality rates among lambs and kids. Further research into the specific causes of these issues is recommended.