This study extensively investigates the catalytic mechanism and oxygen effect in the oxidative steam reforming (OSR) of EtOH on Rh(111) by using plane-wave density functional theory (DFT) and kinetic calculations. The mechanistic results show that both surface acetaldehyde (CH3CHO*) and oxametallacycle (CH2CH2O*) species from CαH and CβH bond scissions of surface ethoxy (CH3CH2O*) groups, respectively, are key intermediates. Both of these species can quickly decomposed into surface carbon (C*), methylidyne (CH*), and carbon monoxide (CO*) species, owing to energetic preferences. However, the removal of the adspecies in the formation of major products CO(g) and CO2(g) through high-barrier oxidation steps are considered the rate-determining steps in the overall catalytic process. In the study of the oxygen effect, surface oxygen (O*) species might slightly elevate the barriers for EtOH decomposition, but can lower the barriers for the rate-limiting oxidation steps. The kinetic calculations, which well-predict the experimental observations, indicate that the rates of those oxidation steps can be further increased at high oxygen pressures. These results conclude that the oxygen effect plays a crucial role in the OSR of EtOH on Rh-based catalysts and further implies that the catalytic performance can be improved by using promoters, which have better oxidative capability, and by increasing the oxygen content, which can assist the oxidation process.