Availability and sustainability of quality water supply and sanitation services are major issues in many countries which accounts for high prevalence of waterborne diseases (WBDs) and hence this study was done on the drinking water quality, sanitation and hygiene practices including prevalence of waterborne diseases in selected Kebeles of Bahir Dar city. The main objectives of this study were to assess drinking water quality at sources, reservoirs and taps, hygiene and sanitation practices as well as prevalence of WBDs in selected Kebeles of Bahir Dar City & suggest improvement on management options based on the findings. Two seasons’ water quality data was obtained from laboratory analysis on 30 sample sites at selected Kebeles. The data on availability of hygiene and sanitation facilities were collected using structured interviews and field observation. Information about prevalence of WBDs was collected using clinical records from five health centers and computed per 1000 people. A cross sectional study was also done to evaluate associated factors for water quality deterioration and WBDs. Then, data was recorded and analyzed using SPSS and correlation and association of factors were evaluated using chi-square test and regression. The results of water quality analysis showed parameters; free residual chlorine(FRC)45.8%, Cr4.4%, Fe-16.6%, turbidity 23.3% in wet and 6.7% turbidity, 50% FRC,11% Fe and 6.7% Cr dry season samples were out of WHO recommended standard. Bacteriological results showed 30% and 50% Total coliforms (TC), 20% and 36.7% Thermo tholernat coli forms in dry and wet season were out of the WHO recommended standards. Prevalence of selected WBDs showed,48.8% and 67% in 2009 and 2010 EC and Diarrhea was highly prevalent (37.1%) followed by helmenthiasis. Significant correlation between frequency of WBDs occurrence with the source of income, household water treatment practices, availability of sanitation and hygienic facilities at (P= 0.013, p=0.011, p=0.022 and p=0.038) respectively. This finding showed quality deterioration, poor hygiene and sanitation practices and high prevalence of WBDs in selected Kebeles of Bahir Dar city. Hence, detailed risk assessment study should be conducted from source to distribution systems including proper water handling and storage at household for attempting the impacts of waterborne diseases. Important Terms: Water quality, hygiene, sanitation, prevalence, waterborne disease.