By using in situ X-ray diffraction, we were able to demonstrate the effect of H2O on the reduction of cobalt oxide particles for Fischer-Tropsch Synthesis. Reduction of Co3O4 to Co via CoO in H-2 produces large quantities of water, which was thought to have an impact upon the reduction of the catalyst down a reactor bed. Bed profiles are produced from saturation of the bottom of the catalyst bed from the H2O produced from the top of the bed. This contribution clearly shows the impact of H2O on the cobalt crystallites to hinder reduction and facilitate sintering of the cobalt particles. In situ X-ray diffraction was used to follow the reduction of the cobalt phase throughout the evolution of the reduction process, while controlled water production and cofeed was used to study the effect across different water levels (from 0 up to 1% H2O). Each study in turn produced clear transitions to CoO and Co metal, while H2O shifted the peaks to higher transition temperatures and slowed the reduction process to cobalt metal.