Hydrogen-fueled argon power cycle engine is a novel concept for high efficiency and zero emissions but suffers from backfire. Water injection has been proven effective in controlling backfire, but the chemical mechanism remains unclear. Therefore, firstly, experimental research on the ignition of hydrogen-oxygen in a shock tube is conducted at typical engine backfire conditions, with diluents of argon or nitrogen, dilution ratios of 79 % and 90 %, equivalence ratios of 1.00, 0.50, and 0.25, at 132 kPa, 909-1579 K. Experimental results show that the ignition delay time is insensitive to the equivalence ratio, diluent ratio, and diluent gases. Secondly, mechanism validation suggests that the collision efficiencies and the pressure dependencies of third-body reactions should be optimized to predict the autoignition better. In this paper, NUIGMech1.3 is recommended for modeling the autoignition at engine-relevant conditions. Thirdly, sensitivity analysis indicates that the reaction R9: H + O-2 = O + OH dominants ignition above 1020 K, while R34a: H + O-2 (+M) = HO2 (+M) dominants below 1020 K. Their competition determines the ignition near 1020 K. Fourthly, the modeling shows that below 1020 K, the high collision efficiency of water considerably increases the net rate of progress of the ignition inhibiting reaction R34a, producing HO2. The consumption of HO2 through HO2 + H = 2OH followed by H-2 + OH = H + H2O results in an overall reaction of 2H(2) + O-2 = 2H(2)O. In contrast, the overall reaction of R9 and other shuffle reactions can be written as a chain-branching reaction of 3H(2) + O-2 = 2H(2)O + 2H. Promoting the ignition retarding reaction R34, along with the inhibiting of the chain-branching reaction, is the chemical kinetic effect of water injection, which helps to control backfire at atmospheric pressure and lower temperature near 950 K.