Background: Patient medication counseling on dispensing of medicines should give the patient clear and complete instructions on how to take or use drugs. The way drugs are taken by the patient is often influenced by the way drugs are dispensed and the type of information given during dispensing. The objective of this study was to assess and compare patient medication counseling in health care facility outpatient pharmacies of Bahir Dar city. Methods: A cross sectional study was conducted from August 5 to 20, 2013 at selected health care facilities in Bahir Dar city. Simple random sampling technique was used to select health facilities. A total of 400 patient-dispenser interactions were selected using systematic random sampling technique from a randomly selected health care facility outpatient pharmacy. The data collection tool was adapted from WHO structure observation form and was modified according to the objectives of the study. Data were collected by non participatory observation of dispensing encounters using checklist. Data was coded, entered into EPI Info (version 3.5.2) and analyzed using SPSS version 16.0. Bivariate and multivariate logistic regression analysis was computed to test the strength of association and level of significance. Finally, P-value <0.05 was considered as statistically significant. Results: A total of 400 dispensing encounters were observed and the overall percentage of satisfactory counseling was 32.8%. The highest percentage of satisfactory counseling score was found in Bahir Dar health center (64.9%) and Adinas higher clinic (46.8%). The most frequent drug information given to patients at the time of counseling were unit dose (99.2%), frequency of administration (96%) and duration of therapy (74%). Differences in dispenser work experiences (AOR = 2.99, CI: 1.67 – 5.37), patient load (AOR = 2.87, CI: 1.83-3.69), average consultation time (AOR=3.42, CI: 1.64-7.13), level of health facility (AOR = 4.31, CI 1.94 – 9.59) and type of health facilities (AOR = 4.29, CI 1.72 – 10.66) were found to be associated factors for satisfactory counseling score. Conclusion: The process of medication counseling at dispensing encounters in health care facilities of Bahir Dar City is not satisfactory. Dispenser work experiences, patient load at dispensary, average consultation time, level of health facility and type of health facilities were found to be significant factors for satisfactory counseling score. Therefore, attention should be given to strong skill development, increasing manpower and implementation of regular monitoring for the application of dispensing ethics to improve patient medication counseling at dispensing encounters.