Pilot plant and annealing experiments have been conducted to study the effect of the higher water content in oxyfuel annealing on oxidation and pickling of cold rolled stainless steel. The experiments were conducted on the austenitic grade AISI 304 in a propane-fired furnace using air and pure oxygen as oxidizers. The experiments were conducted at 1050-1200 °C for typically less than 60 s, in order to simulate industrial annealing of thin strip. Supplementary laboratory annealing trials were made to study the evolution of the microstructure during fast heating rates and short hold times. Increasing the water content from 15 to 50 mol% did not alter the oxidation kinetics or the chemistry of the oxide. Since the oxidation is not altered significantly, the pickling performance of the material remains unchanged. The presence of spalled areas increased the pickling efficiency significantly but this was only seen for material annealed at higher temperature compared to industrial practice. Oxyfuel combustion allows higher heat input and therefore faster heating. The 304 grade recrystallizes readily even at moderate cold rolling reductions so the total annealing time can be reduced substantially if the heating rate can be increased. The present work suggests that this can be done without any downstream effects. Pilot plant annealing experiments have been conducted to study the effect of the higher water content, caused by altering the oxidizer in combustion furnaces, on oxidation and pickling of cold rolled stainless steel. Characterization of oxide, microstructure, mechanical properties, and pickling response suggests that the increasing the water content from 15 to 50 mol% does not result in any negative downstream effects.