Diarrhea remains a significant cause of morbidity and mortality among children in developing countries. Water, sanitation, and hygiene practices (WASH) have demonstrated improved diarrhea-related outcomes but may have limited implementation in certain communities. This study analyzes the adoption and effect of WASH-based practices on diarrhea in children under age five in the rural Busiya chiefdom in northwestern Tanzania. In a cross-sectional analysis spanning July-September 2019, 779 households representing 1338 under-five children were surveyed. Among households, 250 (32.1%) reported at least one child with diarrhea over a two-week interval. Diarrhea prevalence in under-five children was 25.6%. In per-household and per-child analyses, the strongest protective factors against childhood diarrhea included dedicated drinking water storage (OR 0.25, 95% CI 0.18–0.36; p < 0.001), improved waste management (OR 0.37, 95% CI 0.27–0.51; p < 0.001), and separation of drinking water (OR 0.38, 95% CI 0.24–0.59; p < 0.001). Improved water sources were associated with decreased risk of childhood diarrhea in per-household analysis (OR 0.72, 95% CI 0.52–0.99, p = 0.04), but not per-child analysis (OR 0.83, 95% CI 0.65–1.05, p = 0.13). Diarrhea was widely treated (87.5%), mostly with antibiotics (44.0%) and oral rehydration solution (27.3%). Targeting water transportation, storage, and sanitation is key to reducing diarrhea in rural populations with limited water access.