Selection and modification of dielectric has been shown to affect machining characteristics such as process accuracy, material removal rate and surface finish in micro-EDM and is being explored by many for enhanced productivity of the process for industrial viability. Experimental investigation has been carried out in order to study the effect of electrical conductivity of deionized water as dielectric on the electrical breakdown, plasma discharge, and material removal across different voltage-gap combinations using three levels of conductivities, viz. 4 µS/cm, 200 µS/cm, and 410 µS/cm. It is found that higher dielectric conductivity facilitates dielectric breakdown lowering the minimum breakdown potential at a given inter-electrode gap, thereby, offering greater flexibility in the choice voltage and gap conditions. Also, higher conductivity results in more efficient debris removal from the discharge spot. Furthermore, for inter-electrode gaps of 0.5-2 µm, the micro-EDM process is found to be most efficient at deionized water conductivity of 200 µS/cm, as it uses least discharge energy and results in highest material removal per discharge.