Water gas shift reaction plays an important role in the Fischer-Tropsch synthesis reaction over iron-based catalysts. A slurry reactor model which accounted for the kinetics of both Fischer-Tropsch synthesis and water gas shift reaction was used to investigate the effects of hydrogen to carbon monoxide ratio, water vapor concentration and reactor temperature on synthesis gas conversion. The model was used to determine optimum concentration of water in the feed gas. For a given reactor temperature, the optimum concentration of water in the feed gas was found to increase with decreasing hydrogen to carbon monoxide ratio. The optimum concentration of water in the feed gas was found to decrease with increasing reactor temperature. Increasing the water gas shift reaction rate improved syngas conversion for low reaction temperatures.