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Understanding the deactivation of transition-metal carbide catalysts during hydrodeoxygenation (HDO) reactions is of great importance for improving the production of the second generation fuels from biomass. Based on a combined experimental and theoretical study, we present a mechanistic model for the deactivation of molybdenum carbide catalysts during phenol HDO in the presence of water. At increased water pressure, water molecules preferentially bind to the surface, and active sites are no longer accessible for phenol. In line with first principle calculations, experiments reveal that this process is fully reversible because the reduction of the water partial pressure results in a threefold increase in conversion. The direct deoxygenation of phenol was calculated to be the most favorable pathway, which is governed by the structure of the phenol adsorption complex on the surface at high hydrogen coverage. This is consistent with the experimentally observed high benzene selectivity (85 %) for phenol HDO over MoCx/HCS (hollow carbon spheres) catalyst.