Diarrhoea is one of the major contributors to death among under-five children in Ethiopia. Studies conducted in different countries showed that rural children are more severely affected by diarrhoea than urban children. Thus, this study was aimed to identify the socio-demographic, environmental and behavioural associated risk factors of the occurrence of diarrhoea among under-five children in rural Ethiopia. Data for the study was drawn from the 2016 Ethiopian Demographic and Health Survey. A total of 8041 under-five children were included in the study. Binary logistic regression was used to assess the association of occurrence of diarrhoea with socio-demographic, environmental and behavioural factors among under-five children. Children aged 6-11 months (AOR:3.5; 95% CI: 2.58-4.87), 12-23 months (AOR: 3.1; 95% CI: 2.33-4.04) and 24-35 months (AOR: 1.7; 95% CI: 1.26-2.34) as compared to > 35 months were significantly associated with an increasing prevalence of diarrhoea. Children in Afar region (AOR: 1.92; 95% CI: 1.01-3.64) and Gambela region (AOR: 2.12; 95% CI: 1.18, 3.81) were significantly associated with an increasing prevalence of diarrhoea, but a decreasing prevalence in Somali region (AOR: .42; 95% CI: (.217-.80) as compared to Tigray region. Increasing prevalence of diarrhoea was also significantly associated with male children (AOR: 1.3; 95% CI: 1.05-1.58); households who shared toilet facilities with other households (AOR: 1.4; 95% CI: 1.09-1.77); fourth birth order (AOR: 1.81; 95% CI: 1.17-2.79), and fifth and above birth order (AOR: 1.85; 95% CI: 1.22, 2.81) as compared to first order; and mother's current age 35-49 years in a household with ≥3 under-five children (AOR: 4.7; 95% CI: 1.64-13.45) as compared to those maternal ages of 15-24 years in a household with ≤2 under-five children. The age of a child, sex of a child, region, birth order, toilet facilities shared with other households and the interaction effect of the number of under-five children with mother's current age are identified as associated risk factors for diarrhoea occurrence among under-five children in rural Ethiopia. The findings show the need for planning and implementing appropriate prevention strategies considering these risk factors for rural under-five children.