Giardia lamblia, Cryptosporidium parvum and Entamoeba histolytica/dispar are ubiquitous protozoan parasites that affect humans, domestic animals and wildlife throughout the world and have been highlighted as significant waterborne parasitic pathogens. The present study was conducted to assess the prevalence of the three parasitic infections among children using protected and unprotected water sources in three rural sites (Legedini, Adada and Legebira) in Dire-Dawa, Eastern Ethiopia from November 2005 May 2006. Single stool specimens were collected from a total of 1894 children under14 years of age and processed for C. parvum using Modified Ziehl-Neelsen staining method. Giardia, amoeba and other intestinal parasites were detected using formalin-ether concentration and by direct wet mount methods. Out of 1894 children examined, 225 (11.9%), 719 (38%) and 639 (33.7%) were infected with Cryptosporidium parvum, Giardia lamblia and Entamoeba histolytica/dispar, respectively. The prevalence of giardiasis, cryptosporidiosis and amoebiasis during wet season sampling was significantly higher than the dry season in all study sites. On the other hand, no difference was observed in the prevalence of cryptosporidiosis, giardiasis and amoebiasis between children drinking water from protected and unprotected sources in Legedini and Legebira while in Adada significantly high prevalence was observed for the unprotected. The insignificant difference in prevalence between children using the two water sources indicates the presence of contamination of the drinking water at some point before consumption and also indicates the poor personal hygiene and environmental sanitation of the community. The prevalence of giardiasis, cryptosporidiosis and amoebiasis in relation to sex group showed no statistically significant difference. On the other hand, lower age groups had a higher prevalence of infection with giardiasis and amoebiasis, and infections with cryptosporidiosis was not related with age. Co-infections were also detected in 25.4% of the study subjects. In addition, other non-pathogenic intestinal parasites such as Iodoamoeba butschilii, Entamoeba coli, Chilomasix mesnelli and Endolimax nana were also detected in the study, which is an indication of fecal contamination of the drinking water source. Providing high quality drinking water may not significantly reduce the incidence of intestinal parasites other factors such as unhygienic and unsanitary situations overwhelm the beneficial effects of protected water sources. In addition untreated protected drinking water sources are not free of the waterborne parasitic pathogens. Therefore, health education in related to personal hygiene and environmental sanitation and cost effective water purification mechanisms such as boiling and chlorination and others will help in enhancing the health and well-being of the community particularly that of children.