Carbon nanotubes (CNTs) were synthesized over a CoO-MoO/Al2O3 catalyst via decomposition of methane in a horizontal quartz tube reactor. The effect of water vapor on the catalytic activity and catalyst lifetime was investigated for the first time in this system. We found that the introduction of an appropriate amount of water vapor (133.3 ppm) into the reaction environment enhanced and sustained the catalytic activity. A continuous supply of a controlled amount of water vapor was found to be optimal for producing CNTs with high crystallinity. The interruption of water vapor supply provoked the formation of an inner cap structure.