Novel technological applications in catalysis and bactericidal formulation have emerged for zinc oxide (ZnO) nanoparticles owing to their ability to generate reactive oxygen species by fostering H2O dissociation. Rational improvement of those properties requires a mechanistic understanding of ZnO nanoparticle reactivity, which is currently lacking. Here, we determine the structural and electronic properties of nanometer-sized ZnO, determine the binding energetics of H2O adsorption, and compare to an extended macroscopic surface. We show that the electronic density of states of ZnO nanoparticles is size-dependent, exhibiting a decreasing bandgap with the increase of nanoparticle diameter. The electronic states near the Fermi energy dominantly arise from O 2p states, which are spatially localized on “reactive” surface O atoms on the nanoparticle edges that are doubly coordinated. The frontier electronic states localized at the low coordinated atoms induce a spontaneous dissociation of H2O at the nanoparticle edges. The surface Zn and O atoms have inhomogeneous electronic and geometrical/topological properties, thus providing nonequivalent sites for dissociative and molecular H2O adsorption. The free energy of H2O binding is dominated by the electronic DFT interaction energy, which is site-dependent and correlated with the Bader charge of surface Zn atom. Entropy is found to stabilize the bound form, because the increase in the vibrational contribution is greater than the decrease in the translational and rotational contribution, whereas solvation stabilizes the unbound state. The absence of rough edges on an extended, macroscopic ZnO surface prevents spontaneous dissociation of a single H2O. This study underlies the importance of coupling geometrical and electronic degrees of freedom in determining the reactivity of nanoparticles and provides a simple elucidation of the superior catalytic activity of ZnO nanoparticles compared to ZnO in macroscopic forms.