Steam compressor shows great energy-saving potential in mechanical vapor compression and high-temperature heat pump systems. However, leakage remains a huge problem for compressor performance improvement and design optimization. In this article, a thermodynamic model with detailed leakage flow model was developed for the working process in water-injected twin-screw compressor. Altogether, leakage in different paths and heat and mass transfer between injected liquid and compressed vapor were considered. Compared with experimental results, the accuracy of predicted efficiency is within ± 5% for all tested operating conditions. In the validated model, leakage flow in five leakage paths and their effects on compressor efficiency was investigated. Results indicate that leakage can reduce volumetric efficiency by up to 50.2%, while the injected water liquid vaporization can improve volumetric efficiency by 7.9% at 5000 r·min−1. The leakage through contact line (CL), tip sealing (TS) line, and discharge end face (DE) show the most important impact on compressor efficiency, while the leakage through blow hole (BH) and suction end face (SE) has little impact on compressor efficiency. Compared with zero leakage under certain conditions, the reduction of volumetric efficiency caused by CL, TS line, and DE can reach up to 22.4%, 20.4%, and 12.7%, respectively. Reducing clearances of the above three leakage paths can efficiently improve the performance of steam compressor, especially for CL.