Modulation transfer function (MTF) is an important parameter for image quality evaluation of on-orbit optical image systems. Various methods have been proposed to determine the MTF of an imaging system which are based on images containing point, pulse and edge features. In this paper, the edge of the moon can be used as a high contrast target to measure on-orbit MTF of image systems based on knife-edge methods. The proposed method is an extension of the ISO 12233 Slanted-edge Spatial Frequency Response test, except that the shape of the edge is a circular arc instead of a straight line. In order to get more accurate edge locations and then obtain a more authentic edge spread function (ESF), we choose circular fitting method based on least square to fit lunar edge in sub-pixel edge detection process. At last, simulation results show that the MTF value at Nyquist frequency calculated using our lunar edge method is reliable and accurate with error less than 2% comparing with theoretical MTF value. © 2017 SPIE.