Background Diabetic ketoacidosis (DKA) is one of the most serious acute complications of type 1 diabetes (T1D) and the leading cause of morbidity and mortality in children with T1D. This study was aimed at assessing the prevalence and associated factors of DKA in children with newly diagnosed T1D in Addis Ababa. Methods A hospital based cross-sectional study was conducted in selected hospitals in Addis Ababa. Children below the age of 12 years with DKA who were admitted to the pediatric ward in the selected hospitals between January 2009 and December 2014 and the residence of Addis Ababa were included. DKA was defined as children below the age of 12 years who have blood glucose level ≥250mg/dl, ketonuria, and ketonemia and diagnosed being T1D patient for the first time. Descriptive statistics was performed using frequency distribution, mean, median, tables, and graphs. Logistic regression analysis was used to identify independent factors associated with the prevalence of DKA in children with newly diagnosed T1D. Results Of 395 DKA patients who were hospitalized during the five-year period, 142(35.8%) presented with DKA at first diagnosis of diabetes. On the other hand 253 (64.2%) children with DKA had longstanding T1D. Independent factors associated with DKA include: Age category 2–4.49years, 7–9.49 years and ≥9.5years (Adjusted odd ratio (AOR) = 3.14[1.21,8.06]), 3.44(1.39,8.49) and 4.02(1.68,9.60), respectively); parents’ knowledge on the sign and symptoms of DKA (AOR = 0.51[0.27, 0.95]); sign and symptoms of DKA before the onset of DKA (AOR = 0.35[0.21, 0.59]) and infection prior to DKA onset (AOR = 3.45[1.97, 6.04]). Conclusions The overall proportion of children diagnosed with DKA and new onset of T1D in Addis Ababa was high. In particular, children between 9–12 years of age and children whose parents did not know the sign and symptoms of DKA had a high risk of DKA at primary diagnosis of T1D.