While global attention focused on remittance’s effect on overall economic growth, its effect on household welfare received little attention. Having the general objective of investigating the impact of remittances on the welfare of recipient households in Bahir Dar city, this study was used an ESRM that controls for non-random selection bias. Even though some studies have been conducted on this issue, this study is special from them with a methodological gap, primary and household-level data. It uses primary cross-sectional data on selected households from Bahir Dar city. The household welfare had been measured with different outcome indicators namely household income, consumption expenditure, and food expenditure for both recipients and nonrecipients of remittance. The empirical result shows that foreign remittances have a positive and significant impact on the welfare of both foreign remittance recipient households and remittance non-recipient households, if they had recipients. The education status of the household head, number of job holders in the household, ownership of an asset, marital status, size of household and gender of the household head are the most determinant of foreign remittance in the study area. Collaborating with banks and money transfer agents, the government of Ethiopia should devise, appropriate policy and strategies to diversify payment instruments and protect black markets.