BACKGROUND: Despite the potential impact on treatment adherence and recovery, there is a dearth of data on the extent and correlates of internalized stigma in patients with schizophrenia in low income countries. We conducted a study to determine the extent, domains and correlates of internalized stigma amongst outpatients with schizophrenia in Ethiopia. METHODS: The study was a cross-sectional facility-based survey conducted at a specialist psychiatric hospital in Addis Ababa, Ethiopia. Consecutive consenting individuals with a diagnosis of schizophrenia were recruited and assessed using an Amharic version of the Internalized Stigma of Mental Illness (ISMI) scale. RESULTS: Data were collected from 212 individuals, who were mostly single (71.2%), unemployed (70.3%) and male (65.1%). Nearly all participants (97.4%) expressed agreement to at least one stigma item contained in the ISMI; 46.7% had a moderate to high mean stigma score. Rural residence (OR = 5.67; 95% CI = 2.30, 13.00; p < 0.001), single marital status (OR = 3.39; 95% CI = 1.40, 8.22; p = 0.019) and having prominent psychotic symptoms (OR = 2.33; 95% CI = 1.17, 4.61; p = 0.016) were associated independently with a higher stigma score. Almost half of those who discontinued their treatment reported that they had done so because of perceived stigma. Those who had attempted suicide (45.3%) were more likely to have a high stigma score (OR = 2.29; 95% CI = 1.27, 4.11; p = 0.006). Over 60% of the variation in the experience of stigma was explained by four factors: social withdrawal (16.7%), perceived discrimination (14.1%), alienation (13.9%) and stereotype endorsement (12.7%). CONCLUSION: Internalized stigma is a major problem among persons with schizophrenia in this outpatient setting in Ethiopia. Internalized stigma has the potential to substantially affect adherence to medication and is likely to affect the recovery process.