Water dissociation is crucial in many catalytic reactions on oxide-supported transition-metal catalysts. Supported by experimental and density-functional theory results, the effect of the support on OH bond cleavage activity is elucidated for nickel/ceria systems. Ambient-pressure O 1s photoemission spectra at low Ni loadings on CeO2(111) reveal a substantially larger amount of OH groups as compared to the bare support. Computed activation energy barriers for water dissociation show an enhanced reactivity of Ni adatoms on CeO2(111) compared with pyramidal Ni4 particles with one Ni atom not in contact with the support, and extended Ni(111) surfaces. At the origin of this support effect is the ability of ceria to stabilize oxidized Ni2+ species by accommodating electrons in localized f-states. The fast dissociation of water on Ni/CeO2 has a dramatic effect on the activity and stability of this system as a catalyst for the water-gas shift and ethanol steam reforming reactions.