BackgroundMastitis is a disease of major economic importance in dairy industry worldwide. It is of particular concern in developing countries like Ethiopia, where milk and milk products are scarce. The objectives of the study were to estimate the prevalence of mastitis, identify the cow-and herd-level potential risk factors and isolate Staphylococcus aureus, one of etiological agents for contagious mastitis, from cows positive for mastitis. A total of 529 lactating cows selected randomly from 95 herds were screened by California mastitis test (CMT) for sub-clinical mastitis. Also 172 milk samples collected from CMT positive cows were cultured for isolation of S. aureus.ResultsBased on CMT result and clinical examination, the prevalence of mastitis at herd-level was 74.7% (95% CI: 64.5, 82.8). The corresponding cow-level prevalence was 62.6% (95% CI: 58.3, 66.7), of which 59.2 and 3.4% were sub-clinical and clinical mastitis cases, respectively. S. aureus was isolated from 51.2% of the milk samples cultured and 73.2% of the herds affected with mastitis. In the multivariable logistic regression model, the herd-level factors significantly associated (p < 0.05) with the presence of mastitis were herd size, bedding material, and milking mastitic cows last, while at cow-level, breed, parity, stage of lactation, udder and leg hygiene, and teat end shape were noted to have a significant effect on mastitis occurrence.ConclusionThe very high prevalence of mastitis, more importantly the sub-clinical one, in the herds examined revealed the huge potential economic loss the sector suffers. Perhaps this was attributed to lack of implementation of the routine mastitis prevention and control practices by all of the herd owners. The findings of this study warrants the need for strategic approach including dairy extension that focus on enhancing dairy farmers’ awareness and practice of hygienic milking, regular screening for sub-clinical mastitis, dry cow therapy and culling of chronically infected cows.Electronic supplementary materialThe online version of this article (doi:10.1186/s12917-016-0905-3) contains supplementary material, which is available to authorized users.