Background. Depression is a significant contributor to the global burden of disease and affects 350 million people worldwide. Substance use could be the risk factor for depression. Objective. We aim to determine the prevalence and severity of depression and its association with substance use. Methods. A cross-sectional study was conducted on a sample of 650 respondents in Jimma town in March 2014. A multistage stratified sampling method was conducted. Structured questionnaire and Beck's Depression Inventory (BDI-II) scale were used for data collection. Data analysis was done using the SPSS Version 20.0 for Windows. Results. The participation rate of respondents was 590/650 (90.77%). The proportion of females was 300 (50.9%). The current prevalence of depression was 171 (29.0%). Based on the BDI-II grading of the severity of depression, 102 (59.6%) had mild, 56 (32.7%) had moderate, 13 (7.6%) had severe depression. In the present study, age of 55 years and above [OR = 5.94, CI: 2.26–15.58], being widowed [OR = 5.18, CI: 1.18–22.76], illiterates [OR = 9.06, CI: 2.96–27.75], khat chewing [OR = 10.07, CI: 5.57–18.25], cigarette smoking [OR = 3.15, CI: 1.51–6.58], and shisha usage [OR = 3.04, CI: 1.01–9.19] were significantly and independently associated with depression. Conclusion. The finding depicted that depression was a moderate public health problem. Advanced age, being widowed, illiterate, khat chewing, and cigarette and shisha smocking could be the potential risk factors for depression. Risk reduction is recommended.