<PAGE>
 
                                                                    EXHIBIT 10.3


                              FOURTH AMENDMENT TO
                     AMENDED AND RESTATED CREDIT AGREEMENT
                     -------------------------------------

   This Fourth Amendment to Amended and Restated Credit Agreement ("Agreement")
is made as of this 20th day of July, 1998 by and between PSINet Inc. (f/k/a
Performance Systems International, Inc.), a New York corporation ("PSI"), (PSI
hereinafter sometimes referred to as "Borrower"), and Fleet National Bank,
formerly known as Fleet National Bank of Connecticut, successor by merger to
Fleet Bank of Massachusetts, N.A. (hereinafter referred to as the "Bank"), as
lender.

   WHEREAS, as of November 30, 1994, PSI and the Bank entered into a Credit
Agreement (the "Original Credit Agreement");

   WHEREAS, as of March 24, 1995, PSI and the Bank entered into an amendment to
the Original Credit Agreement (the "First Amendment to Credit Agreement") to (i)
increase the term credit from $2,000,000 to $8,500,000, (ii) add the then newly-
acquired PSINet Pipeline New York, Inc.("Pipeline") as a guarantor and (iii)
otherwise amend the Original Credit Agreement, all as set forth in the First
Amendment to Credit Agreement;

   WHEREAS, as of November 10, 1995, PSI, InterCon Systems Corporation
("InterCon"), Software Ventures Corporation ("Software") and the Bank entered
into an Amended and Restated Credit Agreement (the "Amended and Restated Credit
Agreement") which amended and restated the terms of the Original Credit
Agreement as amended by the First Amendment to Credit Agreement to (i) increase
the revolving credit from $1,500,000 to $5,000,000, (ii) add Software and
InterCon as borrowers under the revolving credit (to the extent provided
therein), (iii) increase the term credit from $8,500,000 to $13,500,000 and (iv)
make certain other changes, all as set forth in the Amended and Restated Credit
Agreement;

   WHEREAS, on April 6, 1996, Software merged with and into InterCon, with
InterCon as the surviving entity;

   WHEREAS, as of August 13, 1996, PSI, InterCon and the Bank entered into a
First Amendment to Amended and Restated Credit Agreement (the "First Amendment
to Amended and Restated Credit Agreement") to (i) increase the term credit from
$13,500,000 to $18,500,000, (ii) extend the Term Credit Expiration Date to June
30, 1997, and (iii) make certain other changes, all as set forth in the First
Amendment to Amended and Restated Credit Agreement;

   WHEREAS, as of February 1, 1997, PSI and the Bank entered into a Second
Amendment to Amended and Restated Credit Agreement (the "Second Amendment to
Amended and Restated Credit Agreement) to (i) consent to the sale of the stock
of InterCon and to release all obligations of InterCon and Software to the Bank,
including without limitation, all guarantees and security interests, and (ii)
make certain other changes, all as set forth in the Second Amendment to Amended
and Restated Credit Agreement;

   WHEREAS, on or about June 1996, the assets of Pipeline were sold;

   WHEREAS, as of January 29, 1998, PSI and the Bank entered into a Third
Amended and Restated Credit Agreement (the "Third Amendment to Amended and
Restated Credit Agreement") to (i) establish a new acquisition term credit in
the original principal amount of $20,000,000 to finance the purchase of stock of
iSTAR Internet Inc., a Canadian company, and for working capital, (ii) extend
the expiration date of the revolving credit to March 31, 1998, (iii) cause
delivery to the Bank of an outstanding letter of credit issued by the Bank on
December 31, 1997, as amended, and (iv) make certain other changes as set forth
in the Third Amendment to Amended and Restated Credit Agreement; and

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<PAGE>
 
   WHEREAS, the Borrower and the Bank now desire to further amend the Amended
and Restated Credit Agreement (as amended by the First Amendment to Amended and
Restated Credit Agreement, the Second Amendment to Amended and Restated Credit
Agreement, and the Third Amendment to Amended and Restated Credit Agreement
hereinafter referred to as the "Credit Agreement") to (i) extend the expiration
date of the revolving credit to September 30, 1998, and (ii) make certain other
changes, all as set forth in this Agreement.  Unless otherwise defined herein,
capitalized terms used herein shall have the meanings ascribed to them in the
Credit Agreement.

   NOW, THEREFORE, in consideration of the mutual promises contained in this
Agreement, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

   1.  Section 4.15 of the Credit Agreement is hereby amended by deleting the
amount  "$50,000,000" appearing in line 3 of paragraph (d) thereof and
substituting therefore "$100,000,000".

   2.  Sections 4.22, 4.23, 4.25 and 4.26 of the Credit Agreement are hereby
amended by deleting said sections in their entirety and substituting therefore
the following:

   Section 4.22.  Quick Assets to Funded Debt Ratio and Current Liabilities.
   ------------   --------------------------------------------------------- 

   For the quarter ending June 30, 1998 and thereafter, the ratio of Quick
Assets to the sum of Funded Debt and Current Liabilities shall at all times
equal or exceed 1.50:1.00.

   "Quick Assets" shall mean the sum of all cash, cash equivalents, accounts
receivable, short-term investments (as defined by generally accepted accounting
principles), and marketable securities (as defined by generally accepted
accounting principles) of the Borrower and its Subsidiaries on a consolidated
basis; provided that Restricted Cash shall not be included for purposes of
determining Quick Assets.
 
     "Funded Debt" shall mean all indebtedness for borrowed money of the
Borrower and its Subsidiaries, including without limitation, the Revolving
Credit, the Term Credit and Capitalized Leases; provided that, for the purposes
of this Section 4.22 only, the 10% Senior Notes due 2005 of PSI in the aggregate
original principal amount of $600,000,000 (the "Senior Notes") shall not be
included for purposes of determining Funded Debt.

   "Current Liabilities" shall mean all liabilities and obligations of the
Borrower and its subsidiaries on a consolidated basis that would be classified
as current liabilities determined in accordance with generally accepted
accounting principles consistently applied.

   "Restricted Cash" shall mean the interest escrow for the Senior Notes or any
other cash that is encumbered, subject to a lien in favor of a third party other
than the Bank, subject to a sinking fund, or the use of which is otherwise
restricted (other than by the Bank).

   Section 4.23. [Intentionally Deleted].
   ------------  ----------------------- 

   Section 4.25.  Net Debt to Annualized Revenues Ratio.  The ratio of the Net
   ------------   -------------------------------------                       
Debt of the Borrower and its Subsidiaries on a consolidated basis to Annualized
Revenues on a consolidated basis shall as of the last day of each fiscal quarter
commencing with the fiscal quarter ended September 30, l998 not exceed
2.00:1.00.

   "Net Debt" shall mean (a) Funded Debt less (b) all cash and short-term
investments (as defined by generally accepted accounting principles consistently
applied) of the Borrower and its Subsidiaries on a consolidated basis.

   "Annualized Revenues" shall mean the revenues of the Borrower and its
Subsidiaries on a Consolidated basis determined in accordance with generally
accepted accounting principles consistently applied during the preceding twelve-
month period measured at the end of each fiscal quarter.

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<PAGE>
 
   Section 4.26.  Debt Service Ratio.  The ratio of Consolidated EBITDA to Debt
   ------------   ------------------                                           
Service shall, as of the last day of each fiscal quarter commencing with the
fiscal quarter ended June 30, 1999 equal or exceed 1.00:1.00.

   "Debt Service" shall mean, with respect to any period, all payments of
principal or interest by the Borrower and its Subsidiaries on a consolidated
basis on account of indebtedness for borrowed money including, without
limitation, payment of principal and interest on account of the Credit;
provided, that any interest accreting as a result of any obligations to deliver
additional securities, cash or a combination thereof (at the option of Borrower)
pursuant to the bandwidth transaction with IXC Communications, Inc. shall not be
included for purposes of determining Debt Service.

   3.  Section 1.03 of the Credit Agreement (as amended by letter agreement
dated September 30, 1997 and the Third Amendment to Amended and Restated Credit
Agreement) is hereby amended by deleting the date "March 31, 1998" (the
"Revolving Credit Maturity Date") appearing in line 4 of paragraph (a) thereof
and substituting therefore "September 30, 1998" (the "Revolving Credit Maturity
Date").

   4.  Section 4.24 of the Credit Agreement is hereby amended by deleting said
section in its entirety and substituting therefore Exhibit A hereof.

   5.  After giving effect to this Agreement, all representations and warranties
made by the Borrower and its Subsidiaries in the Credit Agreement and the
Security Documents are true and correct as of the date hereof, except for (i)
those representations which relate to a specific date which are true and correct
as of such date, and (ii) Schedule 2.02, Schedule 2.06 and Schedule I to the
extent that such Schedules, respectively, do not reflect additional
subsidiaries, litigation, and places of business or locations of collateral and
records.  The Borrower acknowledges and agrees to deliver such updated Schedules
to the Bank promptly, and in any event within fifteen (15) days after the date
hereof, and any failure to so deliver shall be deemed to be an Event of Default
under Section 5.01(f) of the Credit Agreement.  The Borrower represents and
warrants that the execution of this Agreement has been duly authorized by
Borrower by all necessary corporate and other action and that the execution will
not conflict with, violate the provisions of, or cause a default or cause an
event which, with the passage of time or giving of notice or both, could cause a
default on the part of Borrower under its charter documents or by-laws or under
any contract, agreement, law, rule, order, ordinance, franchise, instrument or
other document, or result in the imposition of any lien or encumbrance on any
property or asset of Borrower.  The Borrower further represents that this
Agreement is the legal, valid and binding obligations of Borrower, enforceable
against Borrower in accordance with their respective terms.

   6.  The Borrower represents, on behalf of itself and its Subsidiaries, that
it has performed and complied with all covenants and agreements required to be
performed and complied with by them under the Credit Agreement as amended by
this Agreement and the Security Documents (as amended by the First Amendment to
Amended and Restated Credit Agreement, the Second Amendment to Amended and
Restated Credit Agreement, the Third Amendment to Amended and Restated Credit
Agreement, and this Agreement) except to the extent performance or compliance
has been waived or modified in writing by the Bank.

   7.  Except as amended by the First Amendment to Amended and Restated Credit
Agreement, the Second Amendment to Amended and Restated Credit Agreement, the
Third Amendment to Amended and Restated Credit Agreement and this Agreement and
any other written agreements of the Bank, all provisions of the Amended and
Restated Credit Agreement, the Security Documents and all other documents
referred to therein shall remain in full force and effect after giving effect to
this Agreement and are hereby ratified and confirmed as being in full force and
effect and are binding upon the parties thereto in accordance with their terms.

   8.  The amendments set forth in this Agreement shall be deemed effective as
of June 30, 1998.  Immediately upon execution of this Agreement the Borrower
shall pay the Bank a fee of $5,000 in connection with this amendment.  In
addition, upon presentation of an invoice therefor, the Borrower shall pay the
reasonable legal fees and disbursements of the Bank's legal counsel in
connection with this amendment.

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<PAGE>
 
   9.  This Agreement represents the entire agreement among the parties thereto
relating to the amendment to the Amended and Restated Credit Agreement effected
hereby, and supersedes all prior understandings and agreements among the parties
relating to the subject matter of this amendment to the Amended and Restated
Credit Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      36
<PAGE>
 
  IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal
  ------------------------------------------------------------------------------
  as of the date first above written.
  -----------------------------------

                              PSINET INC.
                              -----------


                              By:

                                  Name:
                                  Title:



                              FLEET NATIONAL BANK


                              By:
                                  Name:
                                  Title:



DOCSC\652090.3

                                      37
<PAGE>
 
   Exhibit A to the Fourth Amendment to Amended and Restated Credit Agreement, 
entitled "Consolidated EBITDA," has been omitted.

   The Company agrees to furnish such omitted Exhibit supplementally to the 
Securities and Exchange Commission upon request.




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