Model reactions of 2,2'-dinaphthyl ether (DNE) were carried out to examine the effects of water addition on C-O bond cleavage and aromatic hydrogenation using MoS2 catalyst in situ generated from ammonium tetrathiomolybdate (ATTM) in a microreactor at 350-425 degreesC under H-2 pressure. The use of ATTM significantly increased DNE conversion at. 350-400 degreesC. Addition of water dramatically increased DNE conversion with ATTM at lower temperature (350 degreesC). There exists an optimum range of the ratio of added water to ATTM for the catalytic conversion of DNE; too high or too low a H2O/ATTM ratio was found to give the result very similar to the test without water addition. However, water addition alone does not improve conversion of DNE. To clarify the role of H2O, two-step tests were carried out, in which MoS2 catalyst was prepared using ATTM in the presence of tridecane with and without water, and then DNE was added to the reactor and hydrogenated with and without added water. After the preparation of the active MoS2 catalyst from ATTM and water, the hot removal of water prior to the hydrogenation led to complete conversion of DNE. On the other hand, after the preparation of the active MoS2 catalyst from ATTM alone, an addition of water inhibits the conversion of DNE, These results suggest that more active MoS2 catalyst is generated from ATTM in the presence of a proper amount of water which is effective for C-O bond cleavage and hydrogenation of DNE, but water itself does not have a promoting effect on DNE conversion under the conditions employed. These results also point to an effective and simple way of preparing highly active MoS2 catalysts by using H2O.