Digital health literacy is the use of information and communication technology to support health and health care. Digital health literacy is becoming increasingly important as individuals continue to seek medical advice from various web-based sources, especially social media, during the pandemics such as COVID-19. The study aimed to assess health professionals' digital health literacy level and associated factors in Southwest Ethiopia in 2021. An institution-based cross-sectional study was conducted from January to April 2021 in Ethiopia. Simple random sampling technique was used to select 423 study participants among health professionals. SPSS (version 20) software was used for data entry and analysis. A pretested self-administered questionnaire was used to collect the required data. Multivariable logistic regression was used to examine the association between the digital health literacy skill and associated factors. Significance value was obtained at 95% CI and P<.05. In total, 401 study subjects participated in the study. Overall, 43.6% (n=176) of respondents had high digital health literacy skills. High computer literacy (adjusted odds ratio [AOR] 4.43, 95% CI 2.34-5.67; P=.01); master's degree and above (AOR 3.42, 95% CI 2.31-4.90; P=.02); internet use (AOR 4.00, 95% CI 1.78-4.02; P=.03); perceived ease of use (AOR 2.65, 95% CI 1.35-4.65; P=.04); monthly income of >15,000 Ethiopian birr (>US $283.68; AOR 7.55, 95% CI 6.43-9.44; P<.001); good knowledge of eHealth (AOR 2.22, 95% CI 1.32-4.03; P=.04); favorable attitudes (AOR 3.11, 95% CI 2.11-4.32; P=.04); and perceived usefulness (AOR 3.43, 95% CI 2.43-5.44; P=.02) were variables associated with eHealth literacy level. In general, less than half of the study participants had a high digital health literacy level. High computer literacy, master's degree and above, frequent internet use, perceived ease to use, income of >15,000 Ethiopian birr (>US $283.68), good knowledge of digital health literacy, favorable attitude, and perceived usefulness were the most determinant factors in the study. Having high computer literacy, frequent use of internet, perceived ease of use, perceived usefulness, favorable attitude, and a high level of education will help to promote a high level of digital health literacy.