The elderly are considered as special population, as they differ from younger adults in terms of comorbidity, polypharmacy, pharmacokinetics, vulnerability to drug-drug interactions and adverse drug reactions. Despite the fact that the elderly patients are at high risk of having drug interaction and potential adverse outcomes, studies in this regard are scarce in resource limited settings like Ethiopia. The aim of this study was to assess the prevalence and determinants of potential drug-drug interaction in elderly patients admitted to medical ward of Ayder Referral Hospital in Northern Ethiopia.A cross sectional study was conducted among elderly inpatients aged 60 years and above. The study was conducted from February to May 2014. Prescribed drugs being taken concurrently for at least 24 h were included and checked for drug-drug interaction using Micromedex® 2.0 online drug reference. Data were analyzed using statistical software, statistical package for social sciences for windows version 20. Logistic regression model was used to analyze factors associated with occurrence of drug interaction. P value of <0.05 was considered statistically significant.A total of 140 patients were participated in the study. The mean age (±standard deviation) of participants was 68 (±7) years. Majority (61.4 %) of patients were diagnosed with cardiovascular and/or renal diseases. A total of 814 drugs were prescribed with a mean of 6 (±4) medications per patient during a 13 (±9) days of hospital stay. About two-third (62.2 %) of the respondents were exposed to at least one potential drug-drug interaction. Among these 3.6, 32.9 and 25.7 % of patients had taken contraindicated drug combination, at least one major and at least one moderate drug-drug interaction, respectively. Patients with five or more prescribed medications were four times at risk of having drug-drug interaction (P = 0.00; adjusted odds ratio 4.047; 95 % confidence interval 1.867-8.775).Drug-drug interaction in elderly patients was common in this resource limited set-up. Awareness creation and clinical pharmacist involvement in minimizing the risk associated with potentially harmful drug combinations are needed.