Abstract There is compelling evidence that atmospheric moisture may either increase or decrease midlatitude eddy kinetic energy (EKE). We reconcile these findings by using a hierarchy of idealized atmospheric models to demonstrate that moisture energizes individual eddies given fixed large-scale background winds and temperatures but makes those background conditions less favorable for eddy growth. For climates similar to the present day, the latter effect wins out, and moisture weakens midlatitude eddy activity. The model hierarchy includes a moist two-layer quasigeostrophic (QG) model and an idealized moist general circulation model (GCM). In the QG model, EKE increases when moisture is added to simulations with fixed baroclinicity, closely following a previously derived scaling. But in both models, moisture decreases EKE when environmental conditions are allowed to vary. We explain these results by examining the models’ mean available potential energy (MAPE) and by calculating terms in the models’ Lorenz energy cycles. In the QG model, the EKE decreases because precipitation preferentially forms on the poleward side of the jet, releasing latent heat where the model is relatively cold and decreasing the MAPE, hence the EKE. In the moist GCM, the MAPE primarily decreases because the midlatitude stability increases as the model is moistened, with reduced meridional temperature gradients playing a secondary role. Together, these results clarify moisture’s role in driving the midlatitude circulation and also highlight several drawbacks of QG models for studying moist processes in midlatitudes. Significance Statement Dry models of the atmosphere have played a central role in the study of large-scale atmospheric dynamics. But we know that moisture adds much complexity, associated with phase changes, its effect on atmospheric stability, and the release of latent heat during condensation. Here, we take an important step toward incorporating moisture into our understanding of midlatitude dynamics by reconciling two diverging lines of literature, which suggest that atmospheric moisture can either increase or decrease midlatitude eddy kinetic energy. We explain these opposing results by showing that moisture not only makes individual eddies more energetic but also makes the environment in which eddies form less favorable for eddy growth. For climates similar to the present day, the latter effect wins out such that moisture decreases atmospheric eddy kinetic energy. We demonstrate this point using several different idealized atmospheric models, which allow us to gradually add complexity and to smoothly vary between moist and dry climates. These results add fundamental understanding to how moisture affects midlatitude climates, including how its effects change in warmer and moisture climates, while also highlighting some drawbacks of the idealized atmospheric models.