Pure In2O3 is considered as an efficient methanol steam reforming catalyst. Despite of several studies in the past decades, the mechanism of MSR on In2O3 is still not fully understood. In this work, a periodic density functional theory study of the initial dissociation of methanol and water over the In2O3 (110) surface is presented. The activation energy barriers and thermochemistry for several elementary steps are reported. It is found that the energy barriers for OH bond cleavage of both CH3OH and H2O to produce CH3O and OH species at a surface In-O pair site are very low, indicating that In2O3 (110) can facilely catalyze these two important processes at low temperatures. In addition, the subsequent dehydrogenation of CH3O to CH2O is also found to proceed with a low barrier.