Abstract Background Proper sanitation has been one of the topmost priorities on the global public health agenda. In the past few decades, sanitation programs targeting households have often paid little attention to the disposal of children’s stools. We assessed the individual and contextual factors associated with disposal of children’s faeces in Papua New Guinea. Methods The data used for this study forms part of the 2016–2018 Papua New Guinea Demographic and Health Survey (PDHS). For this study, we focused on women with children less than five years (n = 2095). Both descriptive and inferential analyses were carried out. Descriptive statistics were used to summarize the data, using frequency counts and percentages. The inferential analysis used multilevel logistic regression models to investigate the individual and contextual factors associated with disposal of children’s stools. These models were presented as adjusted odds ratio (AORs), together with their corresponding 95% confidence intervals. Statistical significance was set at p < 0.05. Results More than half (56%) of the women had disposed of their children’s stools unsafely. With the individual level factors, the results showed that women with children < 12 months [AOR =1.71; CI = 1.28–2.29] and women aged 20–24 [AOR =2.58; CI = 1.24–5.37], 35–39 [AOR =2.34; CI = 1.09–5.04], and 40 years and above [AOR =2.51; CI = 1.09–5.79] were more likely to practice unsafe disposal of children’s stool. The odds of unsafe disposal of faeces was also higher among women who visited the health facility for child diarrhea [AOR =1.69; CI = 1.25–2.28]. With the contextual factors, the odds of unsafe disposal of children’s stool was higher among women who lived in the Southern region [AOR =4.82; CI = 2.08–11.18], those who lived in male-headed households [AOR =1.79; CI = 1.19–2.70], and those who had unimproved toilet facilities [AOR =1.96; CI = 1.39–2.76]. On the contrary, women with unimproved source of drinking water were less likely to dispose of their children’s stool unsafely [AOR =0.54; CI = 0.35–0.83]. Conclusion Both individual and contextual factors predict unsafe disposal of children’s faeces in Papua New Guinea. It is recommended that sanitation programs should focus on behavioral change and not only on the extension of water and improved toilet facilities. Such programs should also focus on both individual and contextual factors of women.