Introduction: Malaria causes an overwhelmingly large number of cases and deaths round the globe every year. Insecticide treated nets (ITNs) have become important tools that provide a simple, but effective means of preventing malaria in highly endemic areas. Methods: A community-based cross-sectional study design was used to investigate possession, utilization, and factors affecting possession and utilization of ITNs in Arbaminch Town and the malarious villages of Arbaminch Zuria District, southern Ethiopia from 22nd January to 1st February 2007 on a sample of 454 households. Data were collected using structured, pretested, interviewer-administered questionnaire. Data entry and analysis was performed using SPSS 11.0 for windows. Univariate, bivariate and multivariate analyses were carried out. Results: The coverage for any net and ITN was 75.1% and 58.8% respectively; the utilization rate for any net and ITN by any member of the household the night prior to the study was 71% and 73% respectively. Both coverage and utilization were higher in rural areas than in urban areas. The proportion of pregnant women and children under five years who slept under ITNs the night preceding the study was 35% and 40.3% respectively. Education and income of head of households, place of residence of households and presence of high risk groups in the household were found to be predictors of net possession. Sex and income of head of households, and presence of radio in the households were predictors of utilization of nets by any household member. Education of head of households and place of residence ofhouseholds were predictors of utilization of nets by high risk groups.Conclusions: A wide gap exists between coverage and utilization of ITNs. Use of ITNs by high risk groups is far below the Abuja target. Appropriate BCC interventions are required to narrow the gap between coverage andutilization of ITNs and to escalate use of ITNs by high-risk groups.