Very few deposit-taking microfinance institutions in Kenya are profitable and many of them have collapsed and others have merged to improve in their financial performance. This study investigated the effect of financial leverage on profitability in deposit-taking microfinance institutions in Nairobi City County, Kenya. The specific objectives of the study were the effect of short term debt, long term debt and the equity ratio on profitability in deposit-taking microfinance institutions in Nairobi City County and also to establish the moderating effect of firm size on the relationship between the financial leverage and profitability in deposit-taking microfinance institutions in Nairobi City County. The study was anchored on four theories, namely pecking order theory, agency cost theory, Modigliani and Miller theorem and growth of the firm theory. Furthermore, the study adopted the positivistic approach and a panel regression model was employed to analyze the effects of financial leverage and profitability in deposit-taking microfinance institutions in Nairobi City. The targeted population was 12 deposit-taking microfinance institutions in Nairobi City County. The data was collected for the period between 2014 and 2018. Moreover, the study was conducted a census of all the 12 deposit-taking microfinance institutions in Kenya and the secondary data was used in the study. The data was analyzed using descriptive and inferential statistics. The descriptive statistics was presented in mean, median, standard deviation and frequencies while the inferential statistics included the diagnostics tests, Pearson correlation and multiple linear regression models. The diagnostics tests consisted of panel unit root test, test for fixed or random effects, normality tests, multicollinearity, autocorrelation and heteroscedasticity. The findings of the study showed that short term debt ratio and ROA were positively and significantly associated (r=0.698, p=0.000).Long term debt ratio was positively and significantly associated with ROA(r=0.578, p=0.000).Also, Equity ratio was positively and significantly correlated to ROA (r=0.588, p=0.000).Finally, firm size (log of the total assets) was positively and significantly associated with ROA (r=0.547, p=0.000).Further, short term debt was positively and significantly related with ROA (β=0.860034, p=0.000). Long term debt was negatively and significantly related to the profitability (ROA) (β-0.12477, p=0.037). Additionally, equity ratio was found to be positively and significantly related to ROA (β=0.138056, p=0.000). The R 2 for firm level factors before moderation was 71.42 % but after moderation, the R 2 increased significantly to 76.62 %. This implied that firm size moderate the relationship between financial leverage and profitability of deposit taking microfinance institutions in Nairobi. Moreover, the moderated effect of firm size revealed that there was a positive and significant relationship between short term debt and ROA (β =0.213783, p=0.000). Moreover, the results show that mod...