Since water is both a product and a common reactant impurity in the (partial) methanol oxidation to methyl formate (MeFo) on gold, its effect on the isothermal selectivity to methyl formate was investigated under well-defined single-collision conditions employing pulsed molecular beam experiments and in situ IRAS measurements. Both a flat Au(111) and a stepped Au(332) surface were used as model catalysts to elucidate how water affects the reactivity of low-coordinated step sites as compared to (111) terrace sites employing a range of reaction conditions. The interactions of water with methanol/methoxy as well as with oxygen species are addressed. Theoretical calculations, including static DFT and ab initio molecular dynamics (AIMD) simulations, are employed to enhance the microscopic understanding of water-induced changes in the oxygen species and overoxidation reactivity on gold, which are essential for the selectivity. The results provide not only information on conditions that mitigate the generally negative effect of water on methyl formate formation but also atomic-level insights into water-induced changes in the complex reaction network that governs the reactivity in applied gold catalysts, such as nanoporous gold.