Alternative fuels must emit less amount of pollutants while maintaining the appropriate engine performance than the traditional fuel used. Hydrogen has been studied to be used for fuel cells or hydrogen internal combustion engines (HICEs). HICEs are known to emit nitrogen oxides (NOx) depending on operational conditions. Thus, we experimented with a rotary engine to determine how its thermal efficiency and power change with hydrogen fuels of various air–hydrogen ratios, water contents, and hydrogen storage temperatures. We measured the air–hydrogen ratio, exhaust gas temperature, and thermal efficiency and power of the rotary engine. The higher storage temperature and water content in air in the fuel mixture increased the thermal efficiency, power, and exhaust gas temperature of the rotary engine at a speed higher than that of the piston engine. This result indicates that hydrogen can be used for existing internal combustion engines with optimized operational parameters. This result also provides a reference to improve the performance of HICEs.