Background: Worldwide, alcohol consumption caused 3.8 percent of all deaths and 4.5 percent of the total burden of disease in 2004. Alcohol use disorders (AUDs) are also a burden for individuals and society in Ethiopia. It is important to identify problematic alcohol use at an early stage, as this provides professionals with the opportunity to take preventive measures and, hence, reduce the problems caused by this consumption. The high prevalence of substance abuse problems among persons with psychiatric disorders calls for more effective alcohol and drug use assessment in psychiatric settings. Objectives: To assess prevalence of alcohol use disorders and its associated factors among psychiatric outpatients in Jimma University specialized hospital (JUSH) Methods: A university hospital based cross-sectional study of 365 psychiatric outpatients was conducted from 1st to 15th August 2013 in Jimma zone, south-west Ethiopia. The data were collected by interviewing all psychiatric outpatients coming for treatment at JUSH by using structured questionnaire. An alcohol use disorder was assessed using Alcohol Use Disorders Identification Test (AUDIT). All variables associated with AUDs with a p value ≤ 0.25 were included in the final multivariable model. Results: The estimated prevalence rate of AUD was 38.9%, with 23.3% hazardous drinking, 5.8% alcohol abuse and 9.8% alcohol dependence. In the final multiple logistic regression model AUD was significantly associated with Gender, Religion, Frequency of going to worship places and Cigarette smoking. Being female gender was less likely to develop AUD. Those who were orthodox religion followers, those who never went to the worship places and those who smoke cigarettes were more likely to have AUD. Conclusions: The high prevalence of AUDs detected in our facility-based survey of psychiatric outpatients in Ethiopia implies the need to design effective screening tools and feasible interventions for AUDs.