Recent studies suggest that incorporation of water in the core during core-mantle differentiation is highly plausible; this could significantly influence outer-core transport properties, which has yet to be rigorously studied. We performed ab initio molecular dynamics calculations to investigate the effect of water on the transport properties of liquid iron. We find, at the thermodynamic limit, that the self-diffusion coefficients for Fe are remarkably larger than previously reported values, with and without water. Both the bulk and shear viscosities are of the order of 10−3 Pa·s for the outer core. Water, in the form of H or H2O, can enhance the diffusion of Fe moderately and cause a reduction in both the shear and bulk viscosities, giving rise to an inviscid outer core. The fast liquid Fe dynamics is consistent with the origin and stability of a chemically stratified layer at the topmost outer core. By considering the density jump at the inner-core boundary, we determine that the H content cannot exceed 0.3 wt% in the outer core.