The color changes in chemo-and photochromic MoO3 used in sensors and in organic photovoltaic (OPV) cells can be traced back to intercalated hydrogen atoms stemming either from gaseous hydrogen dissociated at catalytic surfaces or from photocatalytically split water. In applications, the reversibility of the process is of utmost importance, and deterioration of the layer functionality due to side reactions is a critical challenge. Using the membrane approach for high-pressure XPS, we are able to follow the hydrogen reduction of MoO3 thin films using atomic hydrogen in a water free environment. Hydrogen intercalates into MoO3 forming HxMoO3, which slowly decomposes into MoO2 + 1/2 H2O as evidenced by the fast reduction of Mo6+ into Mo5+ states and slow but simultaneous formation of Mo4+ states. We measure the decrease in oxygen/metal ratio in the thin film explaining the limited reversibility of hydrogen sensors based on transition metal oxides. The results also enlighten the recent debate on the mechanism of the high temperature hydrogen reduction of bulk molybdenum oxide. The specific mechanism is a result of the balance between the reduction by hydrogen and water formation, desorption of water as well as nucleation and growth of new phases.