The rocks forming a volcanic edifice or dome are typically saturated or partially-saturated with water. However, most experiments aimed at better understanding the mechanical behaviour of volcanic rocks have been performed on dry samples, and therefore most large-scale models designed to explore volcano stability have used parameters representative for dry rock. Here, we present a combined laboratory and modelling study in which we (1) quantified the influence of water-saturation on the mechanical behaviour of variably altered dome rocks from La Soufrière de Guadeloupe (Eastern Caribbean) and (2) used these new data to investigate the influence of water on dome stability. Our laboratory data show that the ratio of wet to dry uniaxial compressive strength (UCS) and Young's modulus are ~0.30–0.95 and ~0.10–1.00, respectively. In other words, the dome rocks were all mechanically weaker when water-saturated. Further, the ratio of wet to dry UCS decreased with increasing alteration (the wt% of secondary minerals in the rocks). Micromechanical modelling suggests that the observed water-weakening is the result of a decrease in fracture toughness (K_IC) in the presence of water. The ratio of wet to dry K_IC also decreases with increasing alteration, explaining why water-weakening increased as a function of alteration. To explore the influence of water-saturation on lava dome stability, we numerically generated lava domes in Particle Flow Code using the experimental data corresponding to unaltered and altered rock under dry conditions. The strength of the dome-forming rocks was then reduced to values corresponding to wet conditions. Our modelling shows that, although the stability of the unaltered dome was not influenced by water-saturation, larger displacements were observed for the wet altered dome. Additional simulations in which we modelled a buried alteration zone within an otherwise unaltered dome showed that higher displacements were observed when the dome was water-saturated. We conclude that (1) the water-saturation reduces the UCS and Young's modulus of volcanic rock, (2) larger decreases in UCS in the presence of water are observed for altered rocks, and (3) the stability of a dome can be compromised by the presence of water if the dome is altered, or contains an altered zone. These conclusions highlight that the degree of alteration and water-saturation should be mapped and monitored at active volcanoes worldwide, and that large-scale models should use values for water-saturated rocks when appropriate.