We report the formation of atomically flat hydroxyl-terminated (OH-terminated) diamond (111) surfaces, which are obtained by annealing hydrogen-terminated (H-terminated) surfaces in water vapor. When the annealing temperature exceeded 500 degrees C, the two-dimensional hole gas layers on the H-terminated surface disappeared. When Fourier transform infrared attenuated total reflectance spectroscopy was applied on the water vapor-annealed surface, a C-O-H peak was observed. Atomic force microscopy images showed identical surface morphology before and after water vapor annealing.