We use vdW-corrected density functional theory (DFT) calculations with additional electron distribution correction to study the water binding chemistry of an Au nanoparticle supported on CeO2(111) with a linear step-edge. The initial structural model of Au/CeO2 used for DFT calculations is constructed by stabilizing a Au9 nanoparticle at the linear step-edge on a CeO2(111) slab. The calculated binding energy of a water molecule clearly shows that the interfacial site between Au and CeO2 binds water more strongly than the binding sites at the surface of Au nanoparticle. Subsequent water dissociation calculation result shows that the interface-bound water can be relatively easily dissociated into–OH and –H, providing a hydroxyl group that can be utilized as an oxygen source for CO oxidation. Based on the low dissociation energy of the interface bound water molecule, we suggest that the water at the Au-CeO2 interface can facilitate further oxidation of Au-bound CO. Our results point out that Au-CeO2 interface-bound water is beneficial for low-temperature oxidation reactions such as the water-gas shift reaction or preferential CO oxidation reaction.