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Background: Pneumonia is one of the commonest diseases among children in Ethiopia resulting in deaths and hospitalisations. The objective of the current study was to determine the cost incurred by caregivers of under-five children with community-acquired pneumonia admitted to the paediatric ward of Jimma University Specialized Hospital, south-western Ethiopia.Methods: An institution-based cross-sectional study was conducted from 01 January to 28 February 2017, through interviews with caregivers. Data on costs incurred before hospital visit, direct medical and non-medical costs, and indirect costs incurred by caregivers of the children were collected. The collected data were analysed using Statistical Package for Social Sciences version 23.Results: Among the 120 caregivers in the study, a median total cost of 304.5 Ethiopian birr (13.22 USD) was reported. This was mostly contributed by indirect costs associated with earnings lost by caregivers related to travel and stay at hospital with the children. Factors, including permanent residence, family size, hospital stay, wealth index, education and major occupation, were found to have statistically significant association with the level of cost incurred by caregivers.Conclusion: This study identified that a significant level of cost is incurred by caregivers of the children in the hospital, a majority of which was contributed by the lost earnings because of the time spent at the hospital with the children.