Reactions of cellobiose in subcritical and supercritical water were studied. Kinetic study on the cellobiose decomposition clarified that the contribution of hydrolysis to the overall cellobiose decomposition rate decreased and that of retro-aldol condensation greatly increased with decreasing pressure in near-critical and supercritical water. It was found that the rate of retro-aldol condensation was expressed as a first-order reaction rate law and the kinetic parameters of this reaction were estimated. With regards to hydrolysis of cellobiose, it was indicated that the rate of hydrolysis was a second-order reaction (first-order reaction of the water concentration) and its activation energy and preexponential factor were determined. Mechanisms of these reactions were discussed based on the experimental findings. It was suggested that hydrolysis of cellobiose mainly took place by the nucleophilic attack of the oxygen atom of the water molecule or by the attack of a proton ion dissociated from supercritical water to the glycosidic carbon atom of the cellobiose molecule under the condition where the density of water was low and that the increase in the local water density around a solute promotes the hydrolysis rate at identical conditions. It was also found that retro-aldol condensation was promoted as the density of water decreased in near-critical and supercritical water. This is probably because this reaction can take place via the intermediate formed by the intramolecular hydrogen bond linkage of cellobiose, resulting in the enhancement of the intermediate formation by the increase of hydrophobic water molecules at lower water densities such as the gas-phase treatment.