Introduction Cancer, the most stressful event a person may experience often triggers depression. Depression among these groups of people, in turn, affects chemotherapy adherence, length of hospitalization, quality of life and cancer treatment outcome. Even though the problem is enormous studies that address it are limited. Therefore this study was conducted to determine the prevalence of depression and associated factors among cancer patients on chemotherapy in Felege-Hiwot referral hospital and University of Gondar referral hospital, Northwest Ethiopia. Methods An institution-based cross-sectional study was conducted from April to May 2019. A total of 302 cancer patients on chemotherapy were included. Depression was assessed using the patient health questionnaire (PHQ-9). Binary logistic regression was used to select variables and determine Crude Odds Ratio (COR). Variables with P value 0.2 were entered into multivariable logistic regression. Adjusted Odds Ratio (AOR) with 95% confidence intervals for variables with P-value 0.05 was estimated to show factors affecting depression among cancer patients. The fitness of the model was checked by using the Hosmer-Lemeshow goodness-of-fit test. Results The prevalence of depression among cancer patients on chemotherapy was 70.86% (95% CI: 65.38, 75.92). Educational status of college and above (AOR = 0.1, 95% CI: 0.02, 0.43), Jobless (AOR = 0.15, 95% CI: 0.04, 0.58), Underweight(AOR = 2.39, 95% CI: 1.10, 5.19)chemotherapy duration greater than or equal to 6 months or more (AOR = 2.36, 95% CI: 1.16, 4.79) were notably associated with depression. Conclusion The burden of depression among cancer patients in this study was high. We recommend concerned bodies working to curve the problem to intervene based on the identified risk factors. Improving educational status, reducing work stress and maintaining normal weight would reduce depression.