Toward understanding the chemical nature of fuel reforming in liquid phase discharge, a novel kinetic model with being governed by both of mass and energy equations was developed for the first time. Ethanol reforming with water by microwave discharge plasma in liquid (MDPL) was investigated by combining of modeling and experiment, which concluded that the extremely reactive condition created by MDPL inside liquid could efficiently couple electric power directly to liquid. Consequently, a very competitive energy efficiency of ~85% for ethanol reforming was achieved. In addition, the reaction pathway of ethanol in MDPL, what the researchers expected to know, was revealed quantitively based on carbon transfer innovatively. It illustrated that the main reactive species in the MDPL are H, O, OH, HCO, CH2O, C and CxHy radicals, inducing the productions of H2, CO and hydrocarbons (CH4, C2H2 and C2H4). The reaction processes induced by those species determines that ethanol is converted by combing routes of pyrolysis and steam reforming at initial molar ethanol concentration lower than 50%, and it is converted via only pyrolysis route at ethanol concentration higher than 50%. Correspondingly, the determining steps of pyrolysis at ethanol concentration of 50% were quantified as, 93% the ethanol converts to C2H5O firstly via dehydrogenation reactions. And then the produced C2H5O mainly splits 39% to CH2O and 53% to CxHy species (CH3, C2H3 and C2H5). Consequently, CH2O starts the reaction pathway through HCO to final product of CO. CxHy begins the reaction pathway to hydrocarbons (CH4, C2H2 and C2H4) via de- and hydrogenation reactions. Water in the liquid supplies OH radical promoting the conversion of CxHy to CO through oxygen containing species, thereby it regulates the transition of reaction pathway form pyrolysis to steam reforming.