The impact of Eucheuma on water loss and status in sponge cakes was measured and analyzed in this study. Eucheuma was used to replace 0%, 10%, and 20% of wheat flour to make sponge cakes, coded as the control, EP10, and EP20, respectively. The initial water content of batters showed no significant differences (around 57.0%, dry basis), whereas the final EP10 and EP20 products had higher water content. Three stages were found during baking in control sample and these three stages were fitted by linear, linear, and exponential models with root mean squared error (RMSE) of 0.016, 0.018, and 0.133, respectively. Eucheuma addition decreased the water loss rate and changed the water loss stages, which were fitted by linear, linear, and linear models in EP20 sample (RMSE = 0.027, 0.047, and 0.108, respectively). The crust formation and crumb structure analysis showed that the formation of cracks and the disappearance of pore structures hindered the water evaporation. The low‐field proton nuclear magnetic resonance and magnetic resonance imaging results showed that the water status in the final EP20 products was not as tightly as that in the control samples. A proposed schematic diagram was developed based on the qualitative analysis of the transfer mechanisms to explain the total effect of Eucheuma on the water loss rate and status. These results aid our understanding of the water loss process of sponge cakes and promote the potential application of Eucheuma in bakery products.