Anemia remains one of the most widespread nutritional disorders among young children globally. In 2019 alone, nearly 270 million children aged 6–59 months were affected, with African countries bearing a disproportionate share of the burden. Ethiopia continues to face a high prevalence of childhood anemia, characterized by marked differences across administrative regions. Understanding how these regional disparities have evolved over time is essential for guiding equitable public health interventions. This study investigates changes in regional inequality in childhood anemia in Ethiopia between 2005 and 2016.Data for this study were obtained from three nationally representative Ethiopian Demographic and Health Surveys conducted in 2005, 2011, and 2016. The analysis included 17,766 children aged 6–59 months. To account for the hierarchical structure of the data, multilevel binary logistic regression models were fitted to examine factors associated with childhood anemia at individual, household, and community levels. Regional inequality and its temporal changes were assessed using the Theil index, while multivariate decomposition techniques were applied to distinguish the contributions of compositional and structural factors. The likelihood of childhood anemia was influenced by a combination of characteristics operating across multiple levels of analysis (p < 0.001). Considerable regional variation was observed throughout the study period, with the Somali and Afar regions consistently exhibiting the highest anemia prevalence, whereas Amhara, Addis Ababa, and the Southern Nations, Nationalities, and Peoples’ Region recorded comparatively lower levels. The overall measure of relative regional inequality declined modestly, from 0.620 in 2005 to 0.548 in 2016. Decomposition results indicated that roughly one-third of the observed reduction in inequality was explained by differences in measurable population characteristics across regions. Despite some improvement, progress in reducing regional disparities in childhood anemia in Ethiopia has been limited. Over the 11-year period, relative inequality declined by just over 13%, indicating persistent gaps between regions. Addressing inequities related to socioeconomic conditions, maternal anemia, and maternal labor participation—particularly between emerging and more developed regions—remains critical for achieving meaningful reductions in childhood anemia and promoting health equity.