Due to their role in controlling global climate change, the selective conversion of C1 molecules such as CH4, CO, and CO2 has attracted widespread attention. Typically, H2O competes with the reactant molecules to adsorb on the active sites and therefore inhibits the reaction or causes catalyst deactivation. However, H2O can also participate in the catalytic conversion of C1 molecules as a reactant or a promoter. Herein, we provide a perspective on recent progress in the mechanistic studies of H2O-mediated conversion of C1 molecules. We aim to provide an in-depth and systematic understanding of H2O as a promoter, a proton-transfer agent, an oxidant, a direct source of hydrogen or oxygen, and its influence on the catalytic activity, selectivity, and stability. We also summarize strategies for modifying catalysts or catalytic microenvironments by chemical or physical means to optimize the positive effects and minimize the negative effects of H2O on the reactions of C1 molecules. Finally, we discuss challenges and opportunities in catalyst design, characterization techniques, and theoretical modeling of the H2O-mediated catalytic conversion of C1 molecules.