The oxidation of silicon (Si) has been extensively investigated over the past 50 years. Yet, an understanding of the mechanism and rate of liquid Si oxidation in atmospheres containing water vapor, is lacking. The effect of water vapor on the oxidation process is of particular importance in the industrial, metallurgical production and processing of liquid silicon, as a significant amount of silica fume is generated under such conditions. The generation of fume is due to the active oxidation of liquid metal in the tapping, refining, and casting steps—a major occupational health and safety challenge for the Si producers. In this work, the effect of water vapor in the atmosphere on the Si oxidation rate and fume characteristics was investigated experimentally at 1823 K in air–H2O atmospheres. Compared with oxidation in dry air, the rate of oxidation in wet air is higher, and increases to 3-fold compared to that of dry air with increasing water vapor content at 7 kPa, above which the alloy surface was passivated and the oxidation rate stable. To explain the experimental observations, Si oxidation reactions in wet atmosphere were modeled by FactSage 7.1 thermochemical software, by density functional theory (DFT) calculations, and by estimates of detailed reaction thermochemistry and kinetics using statistical thermodynamics and statistical mechanics methods. The increased rate of fuming was explained by the formation of Si–O–H species in the system and the more “sticky” nature of the H2O molecule on the Si surface as compared to the O2 molecule, yielding a higher degree of oxygen utilization toward active Si oxidation, that is, SiO formation.