Introduction: Out of fifteen countries that have the highest death rate from clinical pneumonia in children younger than five-year-old, Ethiopia ranks as number four in the world. Regardless of this fact, efforts to identify determinants of pneumonia have been limited in Ethiopia. This study identifies the risk factors of pneumonia in children aged two months to five years in urban areas of Oromia Zone, Amhara Region, Ethiopia. Methods: The researchers used an institutional-based unmatched case control study. All selected cases were identified through enumeration and control cases were identified systematically. The researchers used structured interviews, and observational and anthropometric measurements to collect the required information. Result: Data were actually collected from 121 cases and 235 controls. The risk of pneumonia was diminished among children in the 2 - 11 months age group (OR = 0.15, 95%CI: 0.06, 0.36) and 12 - 23 months age group (OR = 0. 38, 95%CI: 0.15, 0.92) as compared to children in the 35 - 60 months age group. An increased risk of pneumonia was associated with the father’s primary education (1 - 4) (AOR = 10.7, 95%CI: 2.69, 42.7) and (5 - 8) (AOR = 4.67, 95%CI: 1.2, 17.9) as compared to higher education. Similarly, child cared by housekeeper and their relatives were at higher odds (AOR = 2.79, 95%CI: 1.12, 6.9) of developing pneumonia as compared to child cared by their parents. Children’s having, history of diarrhea (AOR = 3.06, 95%CI: 1.54, 6.11) and household history of acute lower respiratory infection (AOR = 3.04, 95%CI: 1.20, 7.77) respectively, were at higher odds of developing pneumonia compared to their counterpart. Conclusion: This study presents the independent predisposing factors of childcare practice, child history of diarrhea and household history of acute lower respiratory infection for the occurrence of pneumonia. Actions taken against the above risk factors may help to prevent pneumonia.