Abstract: Pro-cyclicality of credit risk due to global systemic factors has precipitated unmatched volatilities of stock returns in the banking sectors leading huge losses for investors in the stock market. In Kenya, the trend of bank collapse due insider lending and spiraling non-performing loans continue to signal negative stock returns. The objective of this study was therefore to empirically examine the influence of credit risk on stock returns in commercial banks listed at Nairobi securities exchange. The study also sought to establish the moderating effect of bank size on the influence of credit risk on stock returns. The ratio of non-performing loans to gross loans and the ratio of loan loss provision were taken as independent variable with bank stock returns as dependent variable and bank size as a moderator variable. Annual secondary data was obtained for the period 2006-2015 with a purposive sample of 9 listed banks. Descriptive correlational research design was used. Generalized least square regression model established that ratio of non-performing loans (NPG) was negatively significant to stock returns while the ratio of loan loss provisions (LLG) was positively significant to stock returns at 5% level of significance. Bank size was found to have a positive moderating effect on the influence of credit risk on stock returns. Overall, the study concluded credit risk influences stock returns at Nairobi Securities Exchange.