Owen held Siegfried Sassoon in an esteem not far from hero-worship, remarking to his mother that he was "not worthy to light [Sassoon's] pipe". The relationship clearly had a profound impact on Owen, who wrote in his first letter to Sassoon after leaving Craiglockhart "You have fixed my life-however short". Owen, writing that he took "an instinctive liking to him", and recalled their time together "with affection." On the evening of 3 November 1917, they parted, Owen having been discharged from Craiglockhart. He was stationed on home-duty in Scarborough for several months, during which time he associated with members of the artistic circle into which Sassoon had introduced him, which included Robbie Ross and Robert Graves. He also met H. G. Wells and Arnold Bennett, and it was during this period he developed the stylistic voice for which he is now recognised. Many of his early poems were penned while stationed at the Clarence Garden Hotel, now the Clifton Hotel in Scarborough's North Bay. A blue tourist plaque on the hotel marks its association with Owen.
Robert Graves and Sacheverell Sitwell (who also personally knew him) stated that Owen was homosexual, and homoeroticism is a central element in much of Owen's poetry. Through Sassoon, Owen was introduced to a sophisticated homosexual literary circle which included Oscar Wilde's friend Robbie Ross, writer and poet Osbert Sitwell, and Scottish writer C. K. Scott Moncrieff, the translator of Marcel Proust. This contact broadened Owen's outlook, and increased his confidence in incorporating homoerotic elements into his work. Historians have debated whether Owen had an affair with Scott Moncrieff in May 1918; Scott Moncrieff had dedicated various works to a "Mr W.O.", but Owen never responded.
Throughout Owen's lifetime and for decades after, homosexual activity between men was a punishable offence in British law and the account of Owen's sexual development has been somewhat obscured because his brother, Harold Owen, removed what he considered discreditable passages in Owen's letters and diaries after the death of their mother. Andrew Motion wrote of Owen's relationship with Sassoon: "On the one hand, Sassoon's wealth, posh connections and aristocratic manner appealed to the snob in Owen: on the other, Sassoon's homosexuality admitted Owen to a style of living and thinking that he found naturally sympathetic." 
Sassoon and Owen kept in touch through correspondence, and after Sassoon was shot in the head in July 1918 and sent back to England to recover, they met in August and spent what Sassoon described as "the whole of a hot cloudless afternoon together."  They never saw each other again. Around three weeks later, Owen wrote to bid Sassoon farewell, as he was on the way back to France, and they continued to communicate. After the Armistice, Sassoon waited in vain for word from Owen, only to be told of his death several months later. The loss grieved Sassoon greatly, and he was never "able to accept that disappearance philosophically."