Deeply understanding the electrochemical activation and inactivation processes of an electrocatalyst is critically important for establishing a high-efficiency nitrogen reduction reaction (NRR) to synthesize an NH3 system. Here we report the utilization of a facile vapor-phase hydrothermal (VPH) method to directly grow ultrafine Nb3O7(OH) nanoparticles on commercial carbon fiber cloth (Nb3O7(OH)/CFC) for the NRR. The results demonstrate that the Nb3O7(OH)/CFC can afford an average NH3 yield rate of 622 μg h−1 mgcat.−1 with a high faradaic efficiency (FE) of 39.9% at −0.4 V versus the reversible hydrogen electrode (RHE) in 0.1 M Na2SO4 electrolyte (pH = 6.1) within 30 min of the NRR, surpassing the performance of most recently reported aqueous-based NRR electrocatalysts. The experimental and theoretical calculation results reveal that the in situ electrochemically converted NbO from Nb3O7(OH) during the NRR is the catalytic active phase with a N2 adsorption free energy of −0.97 eV; however with a reaction time over 30 min, the generated active *N atoms in the *N–NH3 → *N + NH3 hydrogenation step during the NRR are thermodynamically favourable for binding to the oxygen vacancies of NbO to form oxygen-containing NbN0.64 with reduced N2 adsorption free energy (−0.32 eV), resulting in significantly decreased NRR activity. Our studies suggest that although NbO possesses high NRR activity, it may not be a suitable NRR electrocatalyst, owing to easy formation of low active niobium oxynitride during the NRR.