Although the literature on khat (Catha edulis Forsk) is fairly extensive, and several authors have stated the potential adverse effects of habitual use of khat on mental, physical and social well-being, very few population based studies exist to substantiate those statements in Ethiopia. A house-to-house survey of a representative sample of 1200 adults from a rural Ethiopian community was conducted from January to September of 1997 to determine the prevalence of khat use and its association with health, nutritional status, mental distress, substance use, family and social functioning and economic well-being. The current prevalence of khat chewing was found to be 31.7%. Muslims more than Christians, males more than females, those between the ages 15 and 34 years more than other age groups were habitual users. The following factors were found to be significantly associated with khat use: physical illness, (OR = 1.52, 95% CI = 1.14-2.02); injuries (OR = 2.31, 95% CI = 1.42-3.79), undernutrition (OR = 1.76, 95% CI = 1.24-2.48), mental distress (OR = 8.30, 95% CI = 5.20-13.31). Family functioning among current khat users was significantly higher than non users (OR = 1.56, 95%-CI = 1.04-2.28). Social functioning and economic well-being were not significantly associated with khat use. It is concluded that a fairly large proportion of the population consumes khat and that this is related to physical and mental ill-health, although family and social functioning, and economic well-being seem to be unrelated to khat use.