Achieving adequate spacing between pregnancies is a major pathway through which contraceptive practice can render benefits. Directing efforts to increase modern contraception among postpartum women could have a significant impact on increasing contraceptive prevalence rate and other health benefits. However, contraceptive use in the postpartum period is less emphasized by policymakers and program designers in Ethiopia. Therefore, information about the current utilization of modern contraceptives and its associated factors among postpartum women is needed to design strategies and improve service delivery practices in health institutions. The objective of the study is to assess the utilization and factors associated with modern contraceptives use among postpartum women in Felegehiwot referral hospital, Bahirdar city, Northwest Ethiopia. A facility-based cross-sectional study was employed from January 1-31, 2019 among postpartum women in Felegehiwot referral hospital. The data were collected through a face to face interview for 425 women who were attending basic maternal and child health services. Bivariable and multivariable logistic regression was employed to identify the association between the dependent variable, utilization of postpartum family planning, and the explanatory variables. The association was considered statistically significant when P-value was < 0.05. A total of 425 postpartum women participated in the study with a 100% response rate. Over half (53%) of women interviewed used modern contraceptives during the postpartum period. Women who are aware of PPFP during ANC and PNC visits (AOR, 16.99; 95% CI, 2.85 to 101.16); married (AOR 3.052; 95% CI, 1.644 to 5.667); and higher age (AOR, 5.825; 95%CI, 2.519 to 13.467) were more likely to use modern contraceptives in the postpartum period. However, educational status, parity, the spousal reaction for FP related discussions, and contraceptive education failed short of any statistically significant association with modern postpartum contraceptive use. The utilization of modern contraceptives in the postpartum period was found to be relatively lower. Proper counseling on available methods for postpartum women at different instances coupled with increasing contraceptive method mix, enhancing male engagement in family planning programs, and expanding contraceptive information during facility visits for antenatal and postnatal care using different media outlets are important measures to boost contraceptive use.