This short guide will instruct you, foolish mortal, on the art of stealing things in Morrowind.
Either watch the video guide or read the text guide just below the video.

Welcome, mortal.
These are the factors that affect whether you'll succeed or fail in stealing something in Morrowind.

1. Your character stats, specifically:
Sneak


Agility


Luck


In terms of effectiveness: Sneak > Agility > Luck

2. The distance of NPCs from you when you are stealing. Obviously, the farther they are, the harder for them to spot you.

3. The direction NPCs are facing when you are stealing. Of course, them looking away with their back to you is optimal.

4. Your fatigue bar. If it's full, that's great.

5. If you use the Chameleon spell, then the magnitude of the spell. The stronger the better.

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If you are successfully sneaking, then the stealth indicator *should* appear:

Don't take this as gospel however. I've had cases when I had the stealth indicator and my theft failed and I've succeeded without it. However, for the most part this should tell you whether the NPCs see you or not.

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To maximize your chances of stealing something, you should therefore do the following.

1. Train up your Sneak skill (+ Agility, Luck attributes) and/or get artifacts that will increase them for you. There are three artifact suggestions in my video guide above if you are interested.

2. Make sure your stamina is full. This is easy to achieve, just wait/rest for an hour.

3. Make enemy NPCs face away from the object you are thinking of stealing. This is usually quite easy to do as NPCs will automatically rotate to face your character when speaking to you.

Please note however two things. Firstly, NPC's sometimes move unexpectedly. And secondly, if you quickload while near an NPC, that NPC will immediately talk to you and - therefore, face your character. So, if you quicksave before a theft, make sure you are not next to an NPC to save yourself some bother.

4. Cast Chameleon.
If you don't have access to the spell or can't cast it, here's an easy artifact you can get:
The Amulet of Shadows casts Chameleon 80% for 60 seconds.

5. Move yourself away from NPCs by casting telekinesis and snagging the object(s) from a distance.

Alternatively, you could also do the opposite and move the NPC(s) instead.
Your options: open the door and hope really hard they'll walk out. xD
Use a command humanoid spell to move them out.
Steal a minor item to make them chase you out of the room first, as demonstrated in this video (which is not mine):
(works best with guards as regular NPCs might not actually attack you)


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A few final tips.

Pickpocketing is harder than regular stealing. You are not only right next to an NPC, but your chance of success is capped at 56% without the Morrowind Code Patch. So, personally, if I can avoid doing it, I will. Higher value & weight items are harder to steal though.

It doesn't hurt to quicksave before an attempt, especially if your sneak/agility are lower than you'd want.

If stealing multiple items or you are afraid of NPC suddenly turning around or your stealth indicator is blinking -> use right click menu to pause the game and move everything you wanted to steal during that pause into your inventory. You might still fail, but it's all or nothing and you'll only need to succeed once.

Thank you for reading/watching my guide. I hope you found it helpful.

I actually have a YouTube channel that is mostly dedicated to Morrowind, so if you're looking for something specific in this game, check it out: https://www.youtube.com/c/Imperatia/