Methanol steam reforming is a promising reaction for on-demand hydrogen production. Copper catalysts have excellent activity and selectivity for methanol conversion to hydrogen and carbon dioxide. This product balance is dictated by the formation and weak binding of formaldehyde, the key reaction intermediate. It is widely accepted that oxygen adatoms or oxidized copper are required to activate methanol. However, we show herein by studying a well-defined metallic copper surface that water alone is capable of catalyzing the conversion of methanol to formaldehyde. Our results indicate that six or more water molecules act in concert to deprotonate methanol to methoxy. Isolated palladium atoms in the copper surface further promote this reaction. This work reveals an unexpected role of water, which is typically considered a bystander in this key chemical transformation.