As one of the alternative clean fuels, aluminum is suitable for generating hydrogen and power via metal hydrolysis. The reaction process characteristics were studied in a cylindrical reactor with 5 g of Al-Li alloy powder as fuel at moderate temperatures. The test performed good results with 1,130 mL/g alloy of H-2 yield, 86% of the reaction efficiency, and 54.5% of usable heat ratio. The dynamic change of temperature distribution was measured by 12 thermocouples in the reactor, and the maximum was not beyond 892 degrees C. On the basis of the temperature characteristics, the reaction propagation speed was calculated and in the range of 0.57-0.95 mm/s. Moreover, the micromorphology and ingredients presented obvious differences between top product and bottom product, which was resulted from water vapor diffusion. The reaction of Al-Li alloy and steam was determined by both water vapor diffusion and heat transfer, which led to the distinct temperature trends near the vapor inlet, away from the vapor inlet, on the top and at the bottom. On the basis of the results, a mild and controllable hydrogen generation can be achieved at moderate temperatures by optimizing vapor inlet arrangement.