The paper presents results of numerical simulations and measurements of Moderate or Intense Low-Oxygen Dilution (MILD) combustion of hydrogen in oxygen-steam mixtures. The goal of the work was to experimentally investigate combustion completeness and flame stability for various fuel thermal power input, oxygen-steam mixture compositions as well as excess oxygen ratios λ. The process was carried out in a cyclonic flow combustion chamber, where the fuel (hydrogen) and diluted oxidizer (oxygen) were introduced at opposite corners of the combustor, inducing internal recirculation. Besides strong dilution of the oxygen with superheated steam (down to 8 vol. % O2), the recirculated steam further dilutes the reactants, facilitating volumetric oxidation of the fuel and maintaining low and relatively uniform temperature within the chamber. The experiments were conducted to meet the conditions relevant for MILD combustion regime according to criterion of Cavaliere and de Joannon, i.e. oxidizer temperature is higher than the fuel ignition temperature and temperature increase is smaller than the ignition temperature. It was found that the most uniform temperature distributions and highest outlet temperatures were obtained for the smallest excess oxygen ratio, λ = 1 for all studied thermal power inputs. Overall, as expected, higher chemical/thermal energy inputs resulted in higher combustion temperatures, due to lower relative heat losses at high power. The turbulent reactive flow was modelled using Computational Fluid Dynamics software ANSYS Fluent, applying the Large Eddy Simulation approach and utilizing detailed chemical scheme with ‘no-model’ approach in the chemistry calculations. The CFD modelling was used both, in the design of the combustion system, and to compare the numerical results with the experimental data. The results confirmed most of the findings observed in the experiments, however due to the assumption of adiabatic conditions, the calculated temperatures were considerably higher than those experimentally measured.