This study examines how corporate governance (CG) and leverage affect real earnings management (REM) in non-financial firms listed on the Korea Composite Stock Price Index during 2003-2011 by employing corporate governance score (CGS) and total, short-term, and long-term debt ratios (i.e., leverage) as independent variables, and four REM metrics as dependent variables. We find a significant positive relationship between leverage and REM, while there is a negative effect of CG on real manipulations. We also find that firms with a high-level of CG are low-leverage firms, whose managers are less likely to conduct REM activities than those of firms with a low-level of CG. Moreover, our results reveal that CG moderates and weakens the relationship between leverage and REM. These findings are consistent with the controlling hypothesis, alignment of interest between managers and owners, and increase of the firm’s transparency and reliability, which are characteristics of firms with strong CG, whose managers reduce their opportunistic behavior and do not engage frequently in REM activities. Our study complements the literature by detecting the moderating effect of CG, which might be considered an effective mechanism to reduce and avoid REM activities.