In this study, shale samples from the Chang7 Member of Triassic Yanchang Formation in Ordos Basin, China were used to conduct artificially induced thermal maturity experiments from 250 °C to 450 °C for 72 h. The role of water in organic matter (OM) conversion and nanoscale porosity alterations were observed and discussed comprehensively by Rock-Eval pyrolysis, low pressure N2/CO2 adsorption, Fourier transform infrared spectroscopy (FTIR) and water-soluble organic acids (WSOAs) experiments. Results show that Rock-Eval pyrolysis parameters (Tmax, S1, and S2), TOC content, WSOAs and pore volume (PV) show slight changes below 350 °C while these parameters were considerably altered above 400 °C under two different pyrolysis conditions (anhydrous and hydrous), indicating that after 400 °C, the OM conversion and bitumen cracking will accelerate. In comparison to anhydrous pyrolysis, hydrous pyrolysis always has smaller Tmax, implying that water could inhibit OM thermal progression. Moreover, S1 of hydrous pyrolysis is approximately two times higher than that of anhydrous pyrolysis, which originates from water providing an exogenous source of hydrogen to generate excessive volumes of hydrocarbons, enhancing the conversion rate of OM. The WSOAs are 2 to 4 times greater under hydrous pyrolysis than anhydrous pyrolysis, denoting that the presence of water could improve the yield of organic acids via inhibiting the polycondensation of oxygen-containing functional groups and oxidizing organic components by hydroxyl radicals. Moreover, below 350 °C, pyrolysis shale residues exhibit a slightly smaller PV in hydrous pyrolysis, mainly due to the infilling effect of bitumen. However, exceeding 400 °C, PV that was obtained from low pressure N2 adsorption under hydrous pyrolysis conditions is found to be two times as large as the value under anhydrous pyrolysis conditions, which is attributed to the net-PV increase reactions such as thermal cracking, and the dissolution of organic acids. Furthermore, in anhydrous pyrolysis, the polycondensation of oxygen-containing functional groups and the carbon-carbon cross linking could be considered as the two main reaction pathways to release the sources of hydrogen. Collectively, the presence of water is significant for hydrocarbon generation and porosity evolution during thermal progression of OM at various stages.