This study investigates the factors determining labour force transitions of women in India. The apparently puzzling issue of low labour force participation despite substantial economic growth in India has been paid attention in a recently growing literature. However, no study so far has looked into the dynamics of employment in terms of labour force entry and exit in this context. Using nationally representative panel data from the India Human Development Survey (IHDS), we show that women are not only participating less in the labour force, but also dropping out at an alarming rate. Using an endogenous switching model that corrects for selection bias due to initial employment and panel attrition, we investigate the determinants of women's entry into and exit from employment. We find that an increase in income of other members of the household, especially that of husband, leads to lower entry and higher exit probabilities of women. This income effect persists even after controlling for the dynamics of asset holding of the household. Along with the effects of caste and religion, this result reveals the interplay between cultural and economic factors that are important in explaining the declining workforce participation of women in India. Also, having a newborn child has a detrimental effect on women's employment, indicating that provision of childcare facilities can be an important policy instrument in this context. We also explore the effects of education, marital status, household composition and regional characteristics. We find that the National Rural Employment Guarantee Scheme, a large public workfare program, has significant effect on women's employment transition.