In-line digital holographic microscopy (DHM) provides three-dimensional images with large fields of view and depths of field and micrometer-scale resolution, using a compact, cost-effective, and stable setup. Here, we develop the theoretical background and experimentally demonstrate an in-line DHM based on a gradient-index (GRIN) rod lens. In addition, we develop a conventional pinhole-based in-line DHM with different configurations to compare the resolution and image quality of both GRIN-based and pinhole-based systems. We show that in a high-magnification regime, where the sample is positioned near a source that produces spherical waves, our optimized GRIN-based setup provides better resolution (∼1.38µm). Furthermore, we employed this microscope to holographically image dilute polystyrene micro-particles with diameters of 3.0 and 2.0 µm. We investigated the effect of light source-detector and sample-detector distances on the resolution, by both theory and experiment. Our theoretical and experimental results are in good agreement.