The study was aim to examine behavioral factors that influence investment decision of individual investors in Bahirdar city namely availability bias, representativeness bias, overconfidence, loss aversion, regret aversion mental accounting and herding behavior. The study employed explanatory research design. Target population of the study were individual investors invested their money in manufacturing sector, trade sector and service sector. The data for the study was collected through closed ended questionnaire from 266 individual investors. The study used descriptive statistics and multinomial logistic regression model to analyze collected data. The finding of the study revealed that behavioral factors namely representativeness bias, mental accounting, loss aversion bias, regret aversion bias and herding behavior has significant influence on investment decision of individual investors in Bahirdar city. Whereas, availability bias and overconfidence bias has an insignificant influence on investment decision of individual investors. Limited studies on issue of behavioral finance was important for existing as well as potential investors, government and subsequent researcher. Government should give attention and formulate and, implement better policies to minimize negative impact of behavioral factors on investment decision and investors should evaluate information objectively and independently before they rely on others investor’s action.