Background: Women's sexual health and physical desire for sex are most important for their emotional and physical well-being. This study aimed to examine the status of sexual dysfunction among postmenopausal women in Bangladesh and assess the significant risk factors behind this. Methods: A cross-sectional study was conducted among 45–55 years in four public and private hospitals in Bangladesh from April 2021 to June 2021 using a multi-stage sampling technique to enroll the study participants. The female sexual function index (FSFI) scale measured the prevalence of FSD, and the relationship of independent risk factors were assessed using a multivariate logistic regression model. Results: The total score of FSFI among postmenopausal Bangladeshi women was 18.07 ± 8.51. Among 260 participants, the prevalence of FSD was 56.9%. Out of all the significant risk factors, increasing age, urban population group, multiparous, homemakers, duration of menopause, and postmenopausal women with no hormone therapy were significantly associated with FSD. In contrast, those with regular physical activity were protective of FSD. Conclusion: In conclusion, a significant proportion of postmenopausal Bangladeshi women are enduring sexual dysfunction. Proper hormonal therapy and non-hormonal therapies such as physical activity and pelvic floor muscle (Kegel) exercise with adequate counseling are helpful to cope in this distressing situation.