The steam ejector is a core component of an ejector-based refrigeration system. Additionally, steam ejectors can also be potentially applied for a fire suppression system by using pressurized steam droplets to rapidly quench and extinguish the fire. The use of steam will significantly reduce the amount of water consumption and pipe flow rate compared to conventional sprinklers. However, the efficiency of the steam ejector nozzle is one of major factors that can influence the extinguishing mechanisms and the performance of pressurized steam for fire suppression. In this article, to formulate an assessment tool for studying the ideal entrainment ratio and initial flow wetness, a wet steam model has been proposed to enhance our understanding of the condensation and evaporation effects of water droplets from a numerical perspective. The entire steam-ejector system including the nozzle, mixing chamber, throat and diffuser were modeled to study the profiles in axial pressure and temperature across the system, and were compared with self-measured experimental data. In addition, the flow and heat transfer interactions between the fluid mixture and nucleating water droplets were numerically examined by comparing initial conditions with different liquid fractions, as opposed to the ideal gas assumption. With the application of the proposed wet-steam model, the numerical model showed vast improvement in the axial pressure distribution over the ideal gas model. Through numerical conditions, it was found that reducing the wetness of the secondary inlet flow will potentially optimize the system performance with a significant increase of the entrainment ratio from 0.38 to 0.47 (i.e., improvement of around 23%).