Abstract This study aims to gain insight into the mechanism and kinetics during the gasification of biochar in steam, which was formed in situ in a fluidised-bed reactor using mallee wood in two particle size ranges of 0.80–1.0 mm and 2.0–3.3 mm. The overall biochar gasification rate and the formation rates of key product components were calculated by continuously monitoring the product gas stream with a quadrupole mass spectrometer. The kinetic compensation effects reveal that CO and CO2 are both formed from the heterogeneous reactions between the biochar surface and H2O. CO2 is formed either by the surface (biochar)-catalysed water-gas-shift reaction or directly from the carbon active sites involving the same intermediate for the formation of CO, as revealed by the apparent activation energies and apparent pre-exponential factors for CO and CO2 formation. The changes in the particle size of biomass substrate do not affect the extent of the kinetic compensation effects of biochar consumption and formation of CO, CO2 and H2 in the kinetics-controlled and mixed regimes. The similar extent of the kinetic compensation effects of H2 formation and biochar consumption for both particle sizes indicates that the formation of H2 also mainly involve the carbon active sites on the biochar surface instead of the gas-phase water-gas-shift reaction.