Background: Self-stigma associated with mental illness has remained a global public health issue affecting social interactions, health care, productivity and acceptance among others. It is one of important factors contributing to non-adherence to medication that leads to increased hospitalization and higher healthcare costs. Hence, the study aimed to assess self-stigma and medication adherence among patients with mental illness treated at the psychiatric clinic of Jimma University Medical Center (JUMC). Methods: A cross-sectional, community-level study was conducted at Jimma town. The patient's data was collected from records between April and June 2017 and the collected data was analyzed using SPSS version 21. The Internalized Stigma of Mental Illness (ISMI) tool was utilized to measure internalized stigma. Linear regression analysis was performed to get the final model. Statistical significance association was considered at p-values less than 0.05 and 95% confidence interval was used. Results: Males comprised more than half (61%) of the total sample of 300 respondents and with a mean age of 34.99 (SD ± 11.51) years. About one-third (32%) of patients had a working diagnosis of schizophrenia followed by major depressive disorder (24.3%). More than half of them, 182 (60.7%) were adherent to their psychotropic medication. The overall mean value of self-stigma was 2.16 (SD = 0.867) and 84 (28%) of the respondents had moderate to high self-stigma. Using ISMI the mean score of alienation was 2.26 (SD = 0.95), stereotype endorsement 2.14 (SD = 0.784), perceived discrimination 2.18 (SD = 0.90), social withdrawal 2.10 (SD = 0.857) and stigma resistance 2.11 (SD = 0.844). Increasing age of the patients (std. β = − 0.091, p = 0.009) and living with kids and spouse (std. β = − 0.099, p = 0.038) were negatively associated with self-stigma whereas increased world health organization disability assessment schedule (WHODAS) score (β = 0.501, p < 0.001), number of relapses (std. β = 0.183, p < 0.01) and medication nonadherence (std. β = 0.084, p = 0.021) were positively associated with self-stigma. Conclusion: The study revealed that there was high self-stigma among patients with mental illness and a significant association between overall ISMI score and level of medication adherence. These require mental health professionals