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I am using Sharepoint online part of Office 365 and Microsoft Project Professional 2013. When I try Open with Project option from Sharepoint Online , MS Project opens up and asks for username and password and though I enter the credentials, it keeps saying incorrect password and does not move

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Maybe your password is incorrect

Try to reset it, write down the new password and then enter it when MS Project asks for your credentials.

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Couple things:

  1. If you have Office 365 on your machine, you should really update MS project to at least version 2016 64-bit. Earlier versions of Project will not mix well with Office 365

  2. You should always save MS Project files to your local machine before opening them and working on them, rather than opening them from ShapePoint. Working off your local machine rather than a network location will make your Project files less likely to deal with corruption issues, file bloat, etc. You don't have to just take my word for it, check out these direct messages I've had with Rod Gill (Microsoft MVP specializing in MS Project):

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