We use density functional theory to investigate the reaction between reduced CeO2–x(111) and water. H2O dissociation to hydroxyl is facile on surface vacancies and lattice oxygen, while subsequent decomposition of hydroxyl into H2 has a high barrier, which results in reversible adsorption of H2O under ultra-high-vacuum conditions. The barrier to H2 formation through hydroxyl decomposition decreases by 0.2 eV, while H2O formation becomes more difficult at high hydroxyl coverage. However, on isolated oxygen vacancies on a hydroxyl covered surface, H2 may be produced through a CeH intermediate with a 1.14 eV barrier. Oxygen vacancies are found to be more stable in the subsurface than in the surface layer at all vacancy coverages and for hydroxyl coverages less than 25–50%. The competition of H2O desorption and vacancy diffusion from the subsurface to the surface may prevent formation of hydroxyl from H2O dosing at low temperature, while the highly stable hydroxyl phase may provide a thermodynamic driving for...