In this study, we examine the relation between local firms’ corporate social responsibility (CSR) engagement and households’ stock market participation. Using data from U.S. household surveys, we find that households are more likely to participate in the stock market and hold a larger proportion of their portfolios in stocks when the average level of CSR performance of local firms is high. Results from further analyses show that the positive relation between local firms’ average CSR engagement and households’ stock market participation is stronger for households (1) in states in which firms’ CSR engagement tend to receive greater media and more positive exposure; and (2) with a more educated, younger and wealthier head. Overall, our findings suggest that local firms’ CSR performance plays an important role in enhancing investors’ confidence in firms’ ethical practices and financial return from their equity investment, thereby influencing their willingness to participate in the stock market.