Highly selective oxidation of methane to methanol has long been challenging in catalysis. Here, we reveal key steps for the promotion of this reaction by water when tuning the selectivity of a well-defined CeO2/Cu2O/Cu(111) catalyst from carbon monoxide and carbon dioxide to methanol under a reaction environment with methane, oxygen, and water. Ambient-pressure x-ray photoelectron spectroscopy showed that water added to methane and oxygen led to surface methoxy groups and accelerated methanol production. These results were consistent with density functional theory calculations and kinetic Monte Carlo simulations, which showed that water preferentially dissociates over the active cerium ions at the CeO2/Cu2O/Cu(111) interface. The adsorbed hydroxyl species blocked O-O bond cleavage that would dehydrogenate methoxy groups to carbon monoxide and carbon dioxide, and it directly converted this species to methanol, while oxygen reoxidized the reduced surface. Water adsorption also displaced the produced methanol into the gas phase.