Impact of fruit tree incorporation into farming systems on employment and income in the hill region of Nepal was analyzed, by applying the Gini decomposition analysis as a case study. In the study village, the introduction of orange production reduced employment opportunities in farming by 10% as a whole. The effect was most conspicuous for female labor (both family and hired) which decreased by 20%, while the use of hired male labor increased by 10%. It appears that the farm size was the major factor for the introduction of orange cultivation. Neither human resources (both quantity and quality) nor direct access to cash affected the dissemination of orange cultivation. Income from orange farming accounted for 44% of the total household income and for 56% of the total income inequality. Replacement of traditional upland crops by commercial orange may have worsened the income distribution, though absolute income increase might be significant. No villagers participated in marketing activities of orange, which has a large potential of employment and income generation. To further promote rural development focusing on the poor, use of labor for postharvest activities such as marketing and processing is recommended.