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HIV/AIDS stigma is one of the major public health challenges in Ethiopia. This study examined knowledge about HIV/AIDS and factors behind stigmatisation towards people living with the virus based on demographic and health survey data collected in 2011 from women in the age group 15-49 years. The result shows that 49.3% of rural women had adequate knowledge about HIV/AIDS compared with 74.7% of urban women. About three-fourths (72.1%) of the rural women had stigmatising attitudes towards PLWHA whilst the proportion in urban areas was only about a third (34.2%). The likelihood of having adequate knowledge about HIV/AIDS was significantly higher among educated women but lower among those living in Afar, Somali, and Gambella regions and Dire Dawa City. Women with higher levels of education and frequent access to media had a lower tendency to stigmatise people living with the virus. Adequate knowledge about HIV/AIDS was also significantly associated with lower likelihood of stigmatisation. The results generally indicate that HIV/AIDS stigma in Ethiopia is partly explained by people's knowledge about HIV/AIDS and by socio-cultural factors that shape their perception of the epidemic. Awareness-raising efforts should thus consider the socio-cultural contexts in which stigma occurs to tackle discrimination against people living with HIV/AIDS.