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This report describes work recently performed by AVL and DaimlerChrysler, including both simulations and single-cylinder research engine development, to quantify the effects of fuel humidity on the performance of an internal combustion engine fueled by hydrogen. The combustion process was simulated from both a thermodynamic and a chemical kinetics standpoint. Both simulations suggested that substantial NOx reductions could be achieved. An engine was then operated on a laboratory fuel system designed to provide hydrogen at various levels of humidity, and the sensitivity of its performance (emissions and efficiency) to humidity and excess air ratio was determined. These tests verified that NOx emissions were reduced by fuel humidity. Finally, the engine and simulation results were compared. Although correlation was not perfect, the trends proved to be correct.