Previous hydrogen researchers have demonstrated the great potential of hydrogen as a zero-carbon fuel and its wider operational ability to directly replace the existing fossil-fuelled internal combustion engines (ICE). Hydrogen direct-injection technology can operate at stoichiometric combustion conditions, fully eliminating the intake backfire phenomena, which has the benefit of low airflow requirements and is a suitable solution for naturally aspirated ICE platforms. However, significant challenges must be addressed when operating an H2 ICE at or near stoichiometric. These include rapid pressure rise rate, high in-cylinder gas pressure and temperature and the consequential higher engine-out NOx emissions. This study provides a comprehensive experimental analysis of the effect of water injection on a light-duty H2 engine’s performance, efficiency, burn durations and NOx emission. The engine was modified to operate with hydrogen via a centrally-mounted direct H2 injector and an intake port-mounted water injection system. The study included water vapour measurements, NOx concentrations and other exhaust gases. The practical implications of these findings are significant. The results demonstrated that the NOx emissions were reduced by 79% when the water was injected at a rate of 5 kg/h at 10 bar IMEP and 2000 rpm. This reduction in emissions, coupled with the observed decrease in cylinder pressure and the rate of pressure rise, could substantially improve engine performance and efficiency. At higher load regions, the water injection extended the maximum engine load to 24 bar IMEP and increased the engine torque output by 10%. The maximum Indicated Thermal Efficiency (ITE) increased from 41% at 16.5 bar IMEP to 42.5% at 18 bar IMEP at a lower lambda, with a corresponding reduction in the intake-air-boost pressure requirement. Of particular note, the use of water injection decreased the engine-out NOx emissions under high-load conditions by more than 55%, even at richer AFR compared to pure hydrogen operation.