We examined the impact of micro-credit on female labor participation in income-generating activities in rural households of North Wollo, Ethiopia. The study employed selection and average treatment effect models to determine the effect and impact of credit intervention on the decision of women to participate in income-generating activities and their level of engagement. A total of 460 households, participants and nonparticipants of the credit scheme, from three woredas of North Wollo Administrative zone was selected using systematic random sampling. Using the primary data, the study found that micro-credit has positive and significant effect both on women’s decisions to participate in income-generating activities, and the magnitude of time spent on such activities. In particular, the study showed that, on average, women who had access to credit facilities spent 4.45 more hours of time on income-generating activities than the control group. The average time spent by women in the control group in income-generating activities was 1.39 hours. The average treatment effect (ATE) was found to be considerably greater than the average treatment effect among the treated (ATET) implying that poor women with less entrepreneurial capabilities had been targeted for credit participation. Future policies in micro-credit should consider targeting women with better potential for succeeding in business despite their initial income status. The majority of credit participant women were found to be engaged in better and newly developed income-generating activities such as animal fattening and rearing, poultry, bee-keeping, vegetable cultivation and business-related activities. However, a considerable number of women were also engaged in traditional activities such as fire-wood collection and weeding to generate income. Such activities are borderline cases to influence the status of women in intra-household resource allocation: the study noted that where women engage the choice of economic activities needs consideration.