The photoconductivity of solution-cast Zn1-xMgxO (x=0-0.4) and poly(3-hexylthiophene) (P3HT) thin films, and Zn1-xMgxO/ P3HT bilayers is investigated using Time-Resolved Microwave Conductivity (TRMC) with the aim of determining the locus of free charge carrier generation in the bilayer system. The photoconductivity of Zn1-xMgxO thin films, under illumination with 300 nm laser pulses, is limited by the formation of stable excitons and by scattering of the carriers at grain boundaries. The electron mobility in Zn1-xMgxO films decreases exponentially with Mg concentration, up to x=0.4. In agreement with previous work, free carriers are observed in the P3HT film under illumination with 500 nm pulses in the absence of an acceptor. Under illumination with 500 nm pulses, where only the polymer absorbs, the TRMC signal for the Zn1-xMgxO/P3HT bilayers for x >= 0.2 is the same as that of pure P3HT, indicating that free carrier generation in these bilayers occurs predominately by exciton dissociation in the polymer bulk, and not at the interface between the polymer and the solution-cast oxide. At lower Mg concentrations (x<0.2) the TRMC signal increases with decreasing x following the dependence of the electron mobility in the oxide but its light intensity dependence remains consistent with free carrier generation in the polymer bulk. To explain these results and previously published photovoltaic device data (Adv. Funct. Mater. 2007, 77, 264) we propose that free carrier generation in the bilayers predominantly occurs in the bulk of P3HT, and is followed by electron injection to the oxide to yield photocurrent in photovoltaic cells. The dependence of the TRMC signal of the bilayers on Mg concentration is explained in terms of the yield for free carrier generation in the polymer and the relative contributions of electrons in the oxide and holes in the polymer.