The flue gas of natural gas boilers contains a large amount of water vapor, and the latent heat of flue gas can be effectively recovered by thermoelectric generation technology. The performance of thermoelectric generation can be significantly improved by gas humidification. In this study, the thermoelectric generation performance of flue gas and humidified flue gas were analyzed and compared using energy and exergy analysis, and irreversible losses in each link of the system were evaluated. The results showed that both generation efficiency and exergy efficiency increased when the flue gas condensed, with a notably larger increase of exergy efficiency. In the direct flue gas thermoelectric generator system, the maximum exergy destruction was caused by convective heat transfer at the hot side of the PN couple. Although the proportion of hot-side exergy destruction decreased with an increase of module area when the flue gas condensed, it was still the largest exergy destruction. The largest exergy destruction in the humidified flue-gas thermoelectric generator system was caused by humidification process at smaller module areas. With an increase in module area, the exergy destruction caused by heat conduction in the PN couple became the largest exergy destruction. Although exergy destruction was caused by flue gas humidification, the large decrease of exergy destruction at the hot side of the PN couple led to increased output power. Moreover, an increase of the heat transfer coefficient could also reduce the module area.