Urinary tract infection causes considerable morbidity in diabetic patients and if complicated, can cause severe renal damage and life-threatening infections. The escalating antimicrobial resistance rate among bacteria over the past years is another concern in the treatment of urinary tract infections. This study investigated the prevalence, antimicrobial susceptibility pattern of the isolates and associated factors of urinary tract infection among adult diabetic patients attending Metu Karl Heinz Referral Hospital, Southwest Ethiopia. An institutional-based cross-sectional study was conducted among 233 adult diabetic patients selected using simple random sampling technique. Data were collected using a structured questionnaire. Clean-catch midstream urine samples were investigated for the presence of pathogenic bacteria and their antimicrobial susceptibility pattern using recommended culture methods. Data were entered, cleaned, and analyzed using the Statistical Program for Social Sciences version 21.0. Statistical significance was set at a p-value < 0.05. The prevalence of urinary tract infection was 16.7% (95%, CI: 12.0, 21.5). The predominant isolates were Escherichia coli (25.6%) and Klebsiella spp. (20.5%). E. coli isolates showed higher sensitivity to ceftriaxone (80%), ciprofloxacin (70%), and gentamycin (70%), but resistant to tetracycline (60%). Staphylococcus aureus was sensitive to amoxicillin-clavulanic acid (85.7%), and gentamycin (57.1%), while resistant to tetracycline (85.7%), nitrofurantoin (85.7%), and ampicillin (71.4%). The odds of developing urinary tract infections were significantly higher in diabetic females (AOR: 3.56, 95% CI: 1.44, 8.76), those who were not able to read and write (AOR: 2.55, 95% CI: 1.19, 5.49) and those with a history of urinary tract infection (AOR: 2.31, 95% CI: 1.09, 4.90) compared with their counterparts. In this study, the prevalence of urinary tract infection among diabetic patients was relatively comparable with the previous studies conducted in Ethiopia. Management of urinary tract infection in diabetic patients should be supported with culture and antimicrobial susceptibility testing.