In this work, a systematic study of the degradation of UN pellets (density range 96%–99.9% and grain size of 6–24 µm) and UN-10%U₃Si₂ (wt%) composite in a steam environment is presented. Static steam autoclave tests were performed at 300 °C and 9 MPa for period of 0.5–1.5 hours. Microstructural analyses of UN pellets show that, in a high-pressure atmosphere, the fuel collapses principally by intergranular cracking generated by the precipitation of an oxide phase in the grain boundaries. This mechanism leads to a premature mechanical collapse of the fuel pellet, exposing fresh surfaces to steam, and ultimately accelerating the oxidation process. Increasing density (specifically eliminating open porosity) was found to delay the oxidation process, while increasing grain size was found to accelerate the degradation process due to a greater susceptibility to mechanical fracture by way of intergranular oxidation. The performance of the UN-10%U₃Si₂ composite proved to be better when compared to UN. The U₃Si₂ phase served to stabilize the UN grain boundary interface and reacted preferentially with the steam, thereby altering the failure mechanism. In this composite material, the cracking was predominantly intra-granular and the exposure of fresh surfaces was limited, resulting in a slower degradation process.