The influence of water vapor (H2O) volume fraction on the NO x formation and reduction during MILD oxy-coal combustion (MILD-OCC) was investigated by using the plane diffusion flame pulverized coal combustion experimental system. The physicochemical effects of H2O and CO2 on NO x formation during MILD-OCC were quantitatively separated by individually modifying the physicochemical properties of H2O or CO2. Numerical analysis was conducted on the effects of H2O volume fraction on the combustion and NO x formation characteristics under different coflow conditions during MILD-OCC. The results indicate that CO2's molar specific heat capacity is the main reason for the increased release time of volatile nitrogen. The effects of CO2's molar heat capacity and thermal conductivity are significant, delaying the volatile release time by approximately 38 and 11%, respectively. The dominant effects of H2O's thermal conductivity, radiative absorption coefficient, and mass diffusion coefficient of species in H2O cause the combustion temperature to gradually decrease as H2O volume fraction increases at 20%O2. The gasification reaction weakens as the H2O volume fraction increases under low-oxygen conditions, the endothermic reaction decreases, the combustion temperature rises, the CO concentration decreases, the NO x reduction weakens, and the NO x concentration gradually increases. The NO x concentrations at 1473, 1673, and 1873 K decrease by approximately 12, 8, and 4%, respectively, when the H2O volume fraction is increased from 0 to 40% at 20%O2. Compared to the absence of H2O, the NO x concentrations at 10%O2 and 5%O2 with a 40% H2O volume fraction increase by approximately 12 and 7%, respectively, at 1873 K.