Background: Atopic Dermatitis (AD) is now a day's increasing in prevalence globally. A Prevalence of 5-25 % have been reported in different country. Even if its prevalence is known in most countries especially in developing countries there is scarcity with regard to prevalence and associated risk factors of AD among children in Ethiopia settings. The aim of this study was to determine the magnitude and associated factors of atopic dermatitis among children in Ayder referral hospital, Mekelle, Ethiopia. Methods: A facility-based cross-sectional study design was conducted among 477 children aged from 3 months to 14 years in Ayder referral hospital from July to September, 2014. A systematic random sampling technique was used to identify study subjects. Descriptive analysis was done to characterize the study population. Bivariate and multivariate logistic regression was used to identify factors associated with AD. The OR with 95 % CI was used to show the strength of the association and a P value < 0.05 was used to declare the cut of point in determining the level of significance. Results: Among the total respondents, 237 (50.4 %) were males and 233 (49.6 %) were females. The magnitude of the atopic dermatitis was found to be 9.6 % (95 % CI: 7.2, 12.5). In multivariate logistic regression model, those who had maternal asthma (AOR: 11.5, 95 % CI: 3.3-40.5), maternal hay fever history (AOR: 23.5, 95 % CI: 4.6-118.9) and atopic dermatitis history (AOR: 6.0, 95 % CI: 1.0-35.6), Paternal asthma (AOR: 14.4, 95 % CI: 4.0-51.7), Paternal hay fever history (AOR: 13.8, 95 % CI: 2.4-78.9) and personal asthma (AOR: 10.5, 95 % CI: 1.3-85.6), and hay fever history (AOR: 12.9, 95 % CI: 2.7-63.4), age at 3 months to 1 year (OR: 6.8, 95 % CI: 1.1-46.0) and weaning at 4 to 6 months age (AOR: 3.9, 95 % CI: 1.2-13.3) were a significant predictors of atopic dermatitis. Conclusion: In this study the magnitude of atopic dermatitis was high in relation to other studies conducted so far in the country. Maternal, paternal, personal asthma, hay fever histories, maternal atopic dermatitis history, age of child and age of weaning were independent predicators of atopic dermatitis. Hence, the finding alert a needs of strengthening the national skin diseases prevention and control services in particular in skin care of children related to atopic dermatitis and others. In avoiding early initiation of supplementary feeding specially with personal and families with atopic problem needs further attention of prevention activities.