This study aimed to examine the association between household water insecurity (HWIS), mother's handwashing practices, and childhood diarrhea in the peri-urban and informal settlements of Hosanna town. A community-based cross-sectional study involving 424 mothers was carried out in Hosanna town, and the data were collected using a pretested structured questionnaire, HWISE Scale, and an observational checklist. Bivariate and multivariable logistic regression models were used to analyze the data. The study revealed that the prevalence of HWIS and diarrhea among under-five children was 68.6% (95% CI: 64.2–73.1%) and 16% (95% CI: 12.5–19.5%), respectively. Only 42.2% of the mothers had good handwashing practices. Good knowledge of handwashing, positive attitudes toward handwashing, household water security, and the presence of handwashing facilities were significantly associated with good handwashing practices. Children aged 6–11 months, HWIS, uncovered and wide-mouthed water storage containers, unsafe child's stool disposal practices, and hands not washed with soap after defecation, before preparing food, and feeding a child were significantly associated with the occurrence of diarrhea. The prevalence of diarrhea and HWIS was very high. The majority of the mothers had poor handwashing practices. Therefore, findings suggest interventions to improve HWIS and mother's handwashing practices, which could reduce the risk of diarrheal diseases.

  • HWIS was significantly associated with increased diarrheal diseases and reduced hygienic practices.

  • Despite progress in WASH coverage, the prevalence of diarrhea and HWIS remain high.

  • Handwashing with soap before feeding a child, after defecation, and preparing food were key practices in preventing diarrhea.

  • Intervention to improve HWIS and promoting mother's handwashing practices could reduce the risk of diarrhea.

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