The international team, including scientists from Naval Research Laboratory (NRL), applied a sophisticated Doppler technique to the infrared to directly detect the planet and demonstrate the presence of water in its atmosphere.
The planet, named tau Boo b, orbits the nearby star tau Bootis and belongs to a class of exotic planets called "hot Jupiters" that are not found in our solar system.
A hot Jupiter is a massive extrasolar planet that orbits very close to its parent star.
Under these conditions, water will exist as a high temperature steam. While hot Jupiters are found to be relatively common in the Galaxy, the origin and nature of these planets remain the subject of intense research.
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The research team studied data collected at the WM Keck Observatory in Hawaii, using the Near Infrared Echelle Spectrograph instrument.
Because a hot Jupiter is too close to its star to separate the planet's light from that of the star, the researchers adapted a Doppler technique previously used to detect low mass-ratio spectroscopic binary stars.
By comparing the molecular signature of water to the combined light spectrum of the planet and star, the scientists were able to measure the motion of the planet as it orbits the star and establish the presence of water vapour in the planet's atmosphere.
The team also determined that the planet is six times more massive than Jupiter.
"The detection of water vapour in tau Boo b is an exciting and important step in understanding the composition of these exotic planets," Dr John Carr, co-author on the research paper, said.
Prior to this, scientists have reported detections of water for just a few other extrasolar planets.
The finding was published in The Astrophysical Journal Letters.