As an endogenous factor, the agency problem may deteriorate the firm’s credit risk. In this paper, the optimal contracting between the agent and equity holders is embed into the Leland-Toft endogenous default model to study the impact of moral hazard on credit risk and credit spreads. Our model shows that the agency cost induced by moral hazard can have significant impacts on credit spreads. The credit spreads are obviously larger when the moral hazard problem is considered, and our model highlights the role of the key parameters of the moral hazard in affecting the credit spreads. Thus the moral hazard could be used to explain the credit spread puzzle. The explicit formulae of the equity value and the endogenous bankruptcy barrier are also given.