Modern contraceptive utilization is the most effective intervention to tackle unintended pregnancy and thereby reduce abortion and improve maternal, child, and newborn health. However, multilevel factors related to low modern contraceptive utilization and the robust analysis required for decision-making were scarce in Ethiopia. To investigate the individual and community-level predictors of modern contraceptive utilization among reproductive-age women in Ethiopia. We utilized data from a cross-sectional 2019 Performance Monitoring for Action Ethiopia survey. The survey employed a stratified two-stage cluster sampling method to select households for inclusion. In Stata version 16.0, the data underwent cleaning, aggregation, and survey weighting, following which a descriptive analysis was performed utilizing the "svy" command. Subsequently, the primary analysis was executed using R software version 4.1.3. We fitted a two-level mixed effects logistic regression model on 6,117 reproductive-age women nested within 265 enumeration areas (clusters). The fixed effect models were fitted. The measures of variation were explained by intra-cluster correlation, median odds ratio, and proportional change in variance. The shrinkage factor was calculated to estimate the effects of cluster variables using the Interval odds ratio and proportion opposed odds ratio. Finally, the independent variables with a significance level of (P<0.05) and their corresponding Adjusted Odds ratios and 95% confidence intervals were described for the explanatory factors in the final model. In Ethiopia, the prevalence of modern contraceptive utilization was only 37.% (34.3 to 39.8). Women who attained primary, secondary, and above secondary levels of education were more likely to report modern contraceptive utilization with AOR of 1.47, 1.73, and 1.58, respectively. Divorced/widowed women were less likely to report modern contraceptive utilization (AOR:0.18, 95% CI 0.13,0.23) compared to never-married women. Discussions between women and healthcare providers at the health facility about family planning were positively associated with modern contraceptive utilization (AOR:1.84, 95% CI: 1.52, 2.23). Community-level factors have a significant influence on modern contraceptive utilization, which is attributed to 21.9% of the total variance in the odds of using modern contraceptives (ICC = 0.219). Clusters with a higher proportion of agrarian (AOR: 2.27, 95% CI 1.5, 3.44), clusters with higher literacy (AOR: 1.46, 95% CI 1.09, 1.94), clusters with empowered women and girls about FP (AOR: 1.47, 95% CI 1.11, 1.93) and clusters with high supportive attitudes and norms toward FP (AOR: 1.37, 95% CI 1.04, 1.81) had better modern contraceptive utilization than their counterparts. In Ethiopia, understanding the factors related to modern contraceptive use among women of reproductive age requires consideration of both individual and community characteristics. Hence, to enhance family planning intervention programs, it is essential to focus on the empowerment of women and girls, foster supportive attitudes towards family planning within communities, collaborate with education authorities to enhance overall community literacy, pay special attention to pastoralist communities, and ensure that reproductive-age women as a whole are targeted rather than solely focusing on married women.