We performed a seroepidemiological study of Toxoplasma gondii infection in free-range chickens from October 2012 to May 2013. We used cross-sectional two-stage cluster sampling to collect blood samples from wing veins of 601 chickens from central Ethiopia. T. gondii-specific antibodies were assayed by modified agglutination test (MAT). We collected information about risk factors by questionnaire and used univariable and multivariable logistic regression to assess risk factors. An overall seroprevalence of 30·5% [95% confidence interval (CI) 26·27–34·14] and 54·2% (95% CI 47·06–61·36) was found at animal- and flock-level, respectively. The MAT end titre of seropositive chickens (n = 183) were 1 : 60 in 46, 1 : 180 in 28, 1 : 540 in 29, ⩾1 : 1620 in 48, 1 : 6000 in 22, 1 : 18 000 in five, 1 : 54 000 in one, and ⩾1 : 162 000 in four. Animal-level risk factors identified using multivariable logistic regression model were: midland altitude [odds ratio (OR) 2·53, 95% CI 1·12–5·72], cross and exotic breeds (OR 3·17, 95% CI 1·39–7·23), increased age of chickens (OR 2·32, 95% CI 1·19–4·49), extensive management (OR 6·92, 95% CI 1·34–35·86) and the presence of cats (OR 2·08, 95% CI 1·20–3·61). Similarly, flock-level risk factors were midland altitude (OR 3·62, 95% CI 1·31–9·99) and the presence of cats (OR 1·19–4·94). The knowledge of the local people about the health risk of cats to humans and animals is poor. Housing and management of cats and chickens are also poor. The widespread presence of T. gondii infection in free-range chickens of Central Ethiopia provides suggestive evidence for the high level of contamination of the living environment of people with T. gondii oocysts. Meat from free-range chickens might be an important source of infection for humans. Altitude, breed, age, management and presence of cats are independent predictors of seropositivity. Education of farmers about toxoplasmosis and further studies to elucidate the burden of toxoplasmosis in animals and humans warrants consideration.