Background In spite of global efforts for many decades, saving the lives and improving the wellbeing of neonates have been global challenges. Recent estimate shows that about 3 million neonates die each year globally. The greatest burden (98%) of this neonatal death is shouldered by the low and middle-income countries. In Ethiopia, despite promising achievement in under-five mortality reduction, the rate of decline in neonatal mortality remained very slow, with recent status of 37 deaths per 1000 live births. Birth preparedness and complication readiness and the minimum neonatal care package along the continuum of care starting form pregnancy, during labour and delivery and the immediate postpartum period have been identified as comprehensive strategies to address the high neonatal mortality. However, the status of birth preparedness and complication readiness, the provisions of the minimum neonatal care package, their determinants and effects on neonatal health status have not been well investigated at the local context. Moreover, studies on the causes and determinants of the high neonatal mortality in Ethiopia in general and in Jimma Zone in particular are very scarce. Thus, there is a need to conduct a study and identify gaps for policy and program improvement. Objectives The objectives of the study were to assess the status of birth preparedness, complication readiness, neonatal care practices and their effect on neonatal health status in Jimma zone, Southwest Ethiopia. Methods This study was conducted in Jimma Zone, Southwest Ethiopia, from September 2012 to December 2013. Mixed study designs, including cross-sectional and prospective follow up, involving both quantitative and qualitative methods were employed. A sample of 3612 pregnant women, who were identified from 73 clusters selected by multistage sampling techniques were included in the study. Community based surveys by using structured interviewer-administered questionnaires were conducted to collect the quantitative data. In-depth interviews and focus group discussions were conducted with purposively selected participants to collect the qualitative data. Descriptive analyses were done by computing ix summary statistics and proportions. Univariate, bivariate and multivariate analyses were done based on the objectives of the study. Because of the multistage-clustered sampling method, multilevel analyses were done to identify factors affecting the outcomes of interest at different levels. Odds ratios and β-coefficients along with 95%CI were used to show the strengths of associations. Verbal autopsies were also conducted to ascertain the causes of neonatal death. The qualitative data were transcribed in to English and analysed thematically. Results From 3612 pregnant women enrolled to the study at the baseline, 3463 live births occurred and included in the final analysis making a response rate of 95.9%. The status of birth preparedness and complication readiness practice was 23.3% (95% CI: 21.8%, 24.9%). Place of residence and access to health centres were cluster level factors having significant association with birth preparedness and complication readiness. Maternal educational status, husband‘s occupation, wealth quintiles, knowledge of key danger signs during labour, attitude towards birth preparedness and complication readiness and antenatal care use were identified as individual level factors affecting birth preparedness and complication readiness. The coverage of skilled care use in this study was 17.5% (95% CI: 16.2%, 18.8%). The most common reasons for not using skilled care were lack of transport (31.1%), home delivery was the usual place (24.0%) and perception that home delivery was more comfortable (23.1%). Place of residence and access to health centres were identified as higher-level factors affecting skilled care use. Maternal educational status, husband‘s occupation, wealth quintiles, gravida, inter-birth interval, knowledge of key danger signs during labour, antenatal care use and birth preparedness and complication readiness plan were identified as lower level determinants of skilled care use. The status of neonatal care practice was 59.5% (95%CI: 57.6%, 61.3%). Place of residence, maternal education, husband‘s occupation, wealth quintiles, birth order and inter-birth interval were identified as factors affecting neonatal care. x This study found neonatal mortality rate of 35.5 (95%CI: 28.3, 42.6) per 1000 live births. Birth asphyxia (47.5%), neonatal infections (34.3%) and prematurity (11.1%) were the three leading causes of neonatal mortality. Cluster-level variables were found to have non-significant effect on neonatal mortality. Individual-level variables such as birth order, frequency of antenatal care use, delivery place, gestational age at birth, premature rupture of membrane, complication during labour, twin births, size of neonate at birth and neonatal care practice were identified as determinants of neonatal mortality. Conclusions The statuses of birth preparedness and complication readiness as well as skilled care use were found to be low in the study area. Though the status of neonatal care practice was relatively better, neonatal mortality was found to be high. The higher-level factors had significant effects on birth preparedness and complication readiness, skilled care use and neonatal care practice, but had non-significant effect on neonatal mortality. Instead, individual level factors related to intra-partum conditions and care as well as neonatal conditions and care had significant effect on neonatal mortality. Birth preparedness and complication readiness had significant effect on skilled care use, but had non-significant effect on neonatal mortality. Neonatal care practice had significant effect on neonatal mortality. The study identified birth asphyxia, neonatal infections and prematurity as major causes of neonatal death. Recommendations Increasing access to health facilities and means of transportation, strengthening community-based interventions to promote skilled care use, reducing the delays in care seeking for obstetric complications and neonatal care practices are recommended. Besides, designing appropriate context specific behaviour change communication strategies both at the facility and at the community levels to improve service use and minimize the existing barriers are needed. Key words: Birth preparedness, complication readiness, skilled care, neonatal care, neonatal mortality, Southwest Ethiopia