Molecular modeling analyses at Density functional theory DFT level was used to study the possible application of modified graphene (G) as gas sensor. A model molecules of graphene sheet was constructed then modified with nickel oxide NiO attached to graphene through covalent bonds forming G/NiO composite. DFT at B3LYP/6-31G(d,p) was utilized to investigate the physical properties of G; G/NiO; G/NiO/2H2O. Results show that interacting G/NiO composite with water molecules lowers the calculated energy of the formed structure reflecting the possibility of exposing G/NiO structure to humidity, since it forms more energetically stable composition that can be detected by a proper circuit. However, water addition results in significant reduction in the TDM which would enhance its stability. This would increase the efficiency of G/NiO material as a humidity sensor. Mapping molecular electrostatic potential indicated that, the impact of interacting with G/NiO composite through Ni end increases electron cloud on the terminals ensuring the great ability of this region to sense different water molecules. It is concluded that, the change in the physical properties of G/NiO under the influence of water molecules took place. Collecting these data together, it is clear that the studied G/NiO composite could act as humidity sensor.