A key question in the field of ceramics and catalysis is how and to what extent residual water in the reactive environment of a metal oxide particle powder affects particle coarsening and morphology. With Xray Diffraction (XRD) and Transmission Electron Microscopy (TEM), we investigated annealinginduced morphology changes on powders of MgO nanocubes in different gaseous H2O environments. The use of such a model system for particle powders enabled us to describe how adsorbed water that originates from short exposure to air determines the evolution of MgO grain size, morphology, and microstructure. While cubic nanoparticles with a predominant abundance of (100) surface planes retain their shape after annealing to T = 1173 K under continuous pumping with a base pressure of water p(H2O) = 105 mbar, higher water partial pressures promote mass transport on the surfaces and across interfaces of such particle systems. This leads to substantial growth and intergrowth of particles and simultaneously favors the formation of step edges and shallow protrusions on terraces. The mass transfer is promoted by thin films of water providing a twodimensional solvent for Mg2+ ion hydration. In addition, we obtained direct evidence for hydroxylationinduced stabilization of (110) faces and step edges of the grain surfaces.