question: BACKGROUND: Calf diarrhoea is the most serious issue in the livestock industry, resulting in significant financial losses. METHODS: A study was undertaken in 32 urban and peri‐urban dairy farms of Hawassa town to isolate E. coli from diarrhoeic calves, assess associated putative factors related to the occurrence, and the evaluate antibacterial susceptibility patterns of isolates. A convenience sampling technique was performed for the selection of these dairy farms and calf samples. A total of 68 faecal samples were collected directly from the rectum of diarrhoeic calves. The faecal samples were confirmed as E. coli O157: H7 positive using the latex agglutination test. RESULTS: In this study, 47(69.1%) samples were positive for E. coli, of which 22 (46.8%) were identified as E. coli O157:H7 strains based on their latex agglutination character. Factors such as frequency of calf house cleaning, type of supplement provided, and method of colostrum feeding were significantly correlated (p < 0.05) with calf diarrhoea, while the other risk factors had no significant association. Antibiogram of E. coli O157:H7 isolates showed that the isolates were highly sensitive to gentamycin, ceftriaxone, trimethoprim‐sulphamethoxazole, and ciprofloxacin and were found to be resistant to tetracycline, kanamycin and amoxicillin. CONCLUSION: Our findings revealed that calf diarrhoea is still a major health problem of calves in the study area. Hence, improved calf and farm management practice, an ad libitum quantity of colostrum, and good farm hygienic practices should be ensured. This study also revealed that some antibiotic‐resistant E. coli O157:H7 isolates need to be further investigated for their public health implications.