Water vapor is typically present in diesel engine exhausts, and thus the design of catalysts with high water-tolerance is highly desired. The addition of water vapor was shown to have quite different influences on the activity of Ag/Al₂O₃ catalysts with different Ag loadings during the H₂-assisted C₃H₆-SCR of NO_x (H₂-C₃H₆-SCR). The 2 wt% Ag/Al₂O₃ catalyst showed the best activity for H₂-C₃H₆-SCR, with excellent water resistance over the whole temperature range. An enhancement in NO_x conversion was observed after water vapor was introduced, particularly at low temperatures. Over this catalyst, kinetic studies confirmed that H2O addition did not change the apparent activation energy for NO_x reduction, while it increased the reaction order of C₃H₆ from −0.62 to 0.73. This result indicated that the reaction pathway for NO_x reduction was hardly changed by the introduction of water vapor, while a poisoning effect related to C₃H₆ oxidation was decreased. In situ DRIFTS studies and DFT calculations revealed that water vapor significantly inhibits the formation of inert formate during the H₂-C₃H₆-SCR process, and thus more sites are available for the formation of active enolic species and acetates, finally leading to increased activity for 2 wt% Ag/Al₂O₃ in NO_x reduction.