Background Antiretroviral treatment has played a pivotal role in the reduction of HIV/AIDS-related morbidity and mortality. However, treatment options can be impaired by the development of antiretroviral treatment failure. Regular monitoring of the Human Immunodeficiency Virus treatment outcome via viral load tests is the key approach. There is a scarcity of information about HIV treatment failure and risk factors in the study area. Therefore, the study was aimed to assess antiretroviral treatment failure and associated factors among patients on first-line antiretroviral treatment at Tefera Hailu Memorial Hospital, Sekota, northeast Ethiopia. Methods A hospital-based cross-sectional study was conducted on 295 patients on first-line antiretroviral treatment from Nov. 2018 to Apr. 2019. Socio-demographic and clinical variables were collected using a pretested questionnaire, and blood specimen was collected for PCR viral load and CD4 + cell count estimation. Data were entered into Epi-Info and exported to SPSS for analysis. A binary logistic regression model was used to identify associated factors, and P value < 0.05 was considered as statistically significant. Results Of the 295 subjects on first-line ART, 49 (16.6%) and 18 (6.1%) experienced virological and immunological failures, respectively. The failure of the former was associated with poor adherence (AOR: 6.367, P < 0.001), CD4 + count < 500 cells/µL (AOR: 4.78, P = 0.031) and shorter (6–24 months) duration on ART (AOR: 0.48, P = 0.048), while poor treatment adherence (AOR: 11.51, P = 0.012) and drug interruption (AOR: 6.374, P = 0.039) were the independent risk factors for latter. Immunological tests to predict virological failures showed as sensitivity, specificity, PPV, and NPV were 20.4%, 96.7%, 55.5%, and 86.0%, respectively. Conclusions The rate of ART failure was considerably high. Poor adherence, low CD4 + count, prolonged ART, and drug interruption were found to be the most predictor variables for virological and immunological failures. The discrimination power of the immunological parameter was low in comparison to virological measurements as standard methods. Therefore, the study highlighted the need for more attention and efforts to curb associated factors and maximize virological tests for monitoring treatment failures.