BackgroundDiarrhea has remained an unmet challenge in global child health. Its severity may be worse than reported in resource-limited settings. Understanding changing epidemiology is critical to combat diarrheal morbidity. Therefore, this study aimed to understand factors associated with diarrhea among under two years children in Nepal.MethodsA total of 2,348 samples from Multiple Indicator Cluster Survey 2019 were used to estimate the significant child, maternal, household and external environmental predictors of diarrhea using multilevel analysis.ResultsThe prevalence of diarrhea was 11.9% (95% CI: 10.2%-13.6%). Children residing in Koshi Province [AOR (Adjusted Odds Ratio): 2.23, 95% CI: 1.22–4.08], Karnali Province (AOR: 2.28, 95% CI: 1.11–4.70), and Sudurpaschim Province (AOR: 4.49, 95% CI: 2.39–8.42) were at higher risk of diarrhea. Children aged 7–23 months (AOR: 1.56, 95% CI: 1.10–2.20), children with ARI symptoms (AOR: 4.14, 95% CI: 2.21–7.72) and children whose mothers had no access to prenatal care (AOR: 1.87, 95% CI: 1.01–3.45) had a higher risk of diarrhea. Children from below the richest household wealth group (AOR: 1.76, 95% CI: 1.01–3.08) and those from households practicing open defecation, with unimproved or limited sanitation facilities (AOR: 1.52, 95% CI: 1.09–2.11) were more likely to have diarrhea.ConclusionThe findings underscore the need for public health policy-makers to improve sanitation facilities, especially focusing on poor households from Karnali and Sudurpaschim Provinces practicing open defecation to protect the children from the life risk of diarrhea in Nepal.