Background Increasing knowledge on obstetric danger signs (DS) among pregnant women and their families is one of the interventions targeted to reduce maternal and newborn mortality. It is expected that knowledge in DS will lead to early care seeking once complications occur among women or newborns. Health care providers are required to educate women on DS of obstetric emergency during pregnancy, delivery and immediate-post-delivery. This study aimed to determine the level of knowledge on danger signs among rural women and its effect on antenatal care visits, birth preparedness and complication readiness (BPCR) and on use of skilled birth attendance (SBA) during childbirth.Methodology Community-based analytical cross-sectional study was conducted in July 2019 among women who delivered in the past 24 months in two wards at Babati Rural district, Tanzania. Questionnaire was used for data collection. Odds Ratio was used to assess association between knowledge on danger signs with use of services during pregnancy and childbirth.Results A total of 372 women were enrolled, with mean age of 28.5 years (S.D 7.2). All the women attended antenatal care at least once during pregnancy, 65.3% attended ANC 4 or more visits, 85.2% of women were assisted by SBA during childbirth, and 13.7% of the women had birth preparedness and complication readiness plan. Overall, 272 (73.1%) women reported that they were counseled about obstetric danger signs during antenatal clinic visits, but only 32% could mention three or more DS of obstetric and newborn emergency. Overall good knowledge of DS and knowledge of obstetric danger signs during pregnancy were significantly associated with 4 or more ANC visits and birth preparedness and complication readiness but not with SBA use during childbirth.Conclusion Majority of women were counseled on DS during pregnancy, however more than three quarters (68%) had low knowledge. Women who were knowledgeable on danger signs during pregnancy attended 4+ ANC visits and prepared for birth and its complications. There is a need of designing alternative models of engaging women during education/ counseling sessions so that they may have a higher retention of knowledge not only of danger signs but for other maternal and newborn health issues.