The argon-hydrogen co-injection tests were carried out in a multifunction ladle furnace (LF) equipped with a hollow graphite electrode. About 80 kg low carbon steel were refined in LF, the argon-hydrogen gas mixtures were injected onto the melt through the hollow graphite electrode, the flow rates of the gas mixtures were 3 m3/h. Then, applying the plasma local equilibrium thermodynamics and metallurgical thermodynamics theories, a calculation model of argon-hydrogen plasma component concentration was established. Using this model, the particle densities of the argon-hydrogen system were calculated. The decarburization mechanisms during Ar-H2 injection in LF with hollow graphite electrode were studied. The results show that, in the process of traditional LF refining, the carburetion reaction occurs with using the graphite electrode. When the argon-hydrogen was injected into LF, there was a decarburization reaction on the interface of the melt. Compared with the traditional LF, the carburetion rate reduces 33.3% at least. The partial pressure of C2H2 produced by molecule hydrogen is far lower than that of CH4 reacted by monatomic hydrogen. The possible main reactant gas is monatomic hydrogen and the main product is CH4.