The scalable production of high grade activated carbon from abundant coal for supercapacitors application is an efficient way to achieve high value-added utilization of coal sources. However, this technology is challenging due to lack of comprehensive understanding on the mechanism of activation process and effect of external factors. In this paper, the effect of activating temperature and time on the specific capacitance of coal-based activated carbon prepared by H₂O steam activation was studied using the response surface method. Under optimal conditions, coal-based activated carbon exhibits the largest specific capacitance of 194.35 F·g^–1, thanks to the appropriate pore/surface structure and defect degree. Density functional theory calculations explain in detail the mechanism of contraction of aromatic rings and overflow of H₂ and CO during the activation. Meanwhile, oxygen-containing functional groups are introduced, contributing to the pseudocapacitance property of coal-based activated carbon. This mechanism of reactions between aromatic carbon and H₂O vapor provides understanding on the role of water during coal processing at the molecular level, offering great potential to regulate product distribution and predict rate of pore generation. This insight would contribute to the advancement of other coal processing technology such as gasification.