Mercerization had been widely used in the textile industry because of its simplicity and ability to improve the luster, strength, and dyeing properties of cotton fabrics. However, the water transfer behavior of mercerized cotton fabrics had not been systematically investigated. In this work, cotton fabrics were treated with different concentrations of alkali (130 and 260 g/L) for structural characterization (scanning electron microscopy [SEM], Fourier transform infrared [FTIR]), water absorption (vertical wicking height), moisture absorption (moisture return rate), water retention, and so forth, and were compared with industrial mercerized cotton. It meant that water absorbency and water holding capacity of mercerized cotton textiles were improved by reducing surface impurity, increasing amorphous region, and increasing the number of free hydroxyl groups. It was easier for water molecules to move through the fabric as the vertical wicking height increased. Research showed that the water absorption and water transfer properties of cotton fabrics were related to the alkali concentration in the mercerized treatment, and a comparison with industrial mercerized cotton also proved this point. It also showed that the amount of tension had an effect on water transfer in the fabric, which provided further precision in regulating the mercerization process, improving the thermal comfort of mercerized fabrics, and achieving the aim of regulating the mercerization process according to market demand and environmental influences.