Moderate or Intense Low-oxygen Dilution (MILD) combustion has low emission potential in gas turbines. The present work has investigated the performance of MILD combustion with parallel-jet burner arrangement in dry and steam-diluted conditions. The combustion tests were conducted in atmospheric pressure at various equivalence ratios from LBO (Lean Blow Out) to near-stoichiometric conditions and steam-to-air mass ratios from 0 to 0.2. A simplified chemical reactors network (CRN) model based on MILD combustion concept has been established to study the effect of steam dilution on different pathways of NO production. The experimental results show that under the same adiabatic flame temperature, the reaction zone gradually moves downstream with the increase of steam content. For the high steam content (0.2 kg/kg), the reaction zone is widely distributed, and the distribution of reaction intensity in the reaction zone is more uniform. The average lift-off height of reaction zone is proportional to the steam content. For the steam content of 0.2 kg/kg, the average lift-off height reaches 2.5 times that of the dry conditions, which brings the risk of blowout. For the adiabatic flame temperature of 1650–1900 K, the emissions of NOx are below 3×10−6 (at 15% O2, dry) when the steam content varies from 0 to 0.2 kg/kg, which indicates the ultra-low emissions can be obtained under large changes in steam content. For the inlet temperature of 381 K, as the steam content increases, the Prompt NO is dominant in the total NO production. Steam dilution results in a smaller operating range with lower CO emissions. When the steam content reaches 0.2 kg/kg, compared to the dry condition, the carbon monoxide emission increases significantly. In addition, the LBO equivalence ratio of combustion with larger steam content is significantly higher.