Diarrhea is highly prevalent in Nigeria and accounts for 16% of deaths among Nigerian children. The WHO classifies water source into two categories: improved and unimproved. This study aimed to examine the association between type of water source and the prevalence of diarrhea among members of a nationally representative sample of Nigerian households while controlling for key sociodemographic and household factors. This study used cross-sectional data from 22,571 households participating in the 2018 Water, Sanitation and Hygiene-National Outcome Routine Mapping survey. Data collectors visited and interviewed household members across all 36 states in the country. Logistic regression was used to assess associations between water source type and the odds of a family member reporting diarrhea, after controlling for financial status, availability of soap/detergent for handwashing, availability of a refrigerator in the home, toilet type, and urban/rural status. After controlling for explanatory variables in the adjusted model, having an unimproved water source was associated with greater odds of diarrhea among a family member (odds ratio, 1.59; 95% CI, 1.44-1.77). Not having a refrigerator and not having soap/detergent for handwashing were also associated with greater odds of diarrhea. In summary, this study found an association between water-source type and diarrhea prevalence among Nigerian households. This study is in line with prior studies in Nigeria and elsewhere, and the results call for greater commitment and action by stakeholders to improve water sources and, ultimately, reduce the prevalence of diarrhea in Nigeria.