HD 189733b orbits very close to its parent star
The detection in the extrasolar planet HD 189733b was made using Nasa's powerful Spitzer Space Telescope and is reported in the journal Nature.
The team looked for the signal of water absorption in starlight poking through the edges of the atmosphere when the planet passed in front of its star.
It is only the second time water has been detected on an exoplanet.
Some researchers suggest that the presence of water could be a feature that is common to all gas giants - the type of planet represented by Jupiter, Saturn, Uranus and Neptune in our own Solar System.
The 'holy grail' for today's planet hunters is to find an Earth-like planet that also has water in its atmosphere
Giovanna Tinetti, UCL
Although water is a key ingredient for biology, the planet is far too hot to harbour life.
It orbits extremely close to its parent star - more than 30 times closer to its star than the Earth is to the Sun.
As such, temperatures range from a scorching 1,200 Kelvin (930C) on the dayside of the planet, to a relatively balmy 700 Kelvin (427C) on the nightside. This type of planet is known as a "hot Jupiter".
Letting off steam
Giovanna Tinetti, from University College London and colleagues, measured the radius of the hot Jupiter HD 189733b at different wavelengths by tracking how much starlight is blocked by the planet as it crosses in front of its parent star as viewed from Earth.
The planet looked bigger at the wavelength bands that corresponded to water, suggesting water vapour was present in its atmosphere.
Nasa's Spitzer infrared telescope
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She added: "Our method can be used in the future to study more 'life-friendly' environments."
Another team of astronomers previously detected water vapour in the atmosphere of a "hot Jupiter" called HD 209458b. The study, by astronomers in the US, was published in the Astrophysical Journal earlier this year.
But some critics have argued that instrument effects in this data could have created the same signal as water vapour.
Life search
Dr Tinetti said: "The 'holy grail' for today's planet hunters is to find an Earth-like planet that also has water in its atmosphere.
"When it happens, that discovery will provide real evidence that planets outside our Solar System might harbour life."
Co-author Sean Carey of the Spitzer Science Center in California commented: "Finding water on this planet implies that other planets in the Universe, possibly even rocky ones, could also have water."
Earlier this year, the Spitzer Space Telescope became the first telescope to analyse, or break apart, the light from two transiting "hot Jupiters", HD 189733b and HD 209458b.
This led to the first-ever "fingerprint", or spectrum, of an exoplanet's light.
NASA says that the Spitzer Space Telescope has detected water vapour on HD 189733b, a massive exoplanet orbiting the dwarf star HD 189733, "trillions of miles" outside our solar system. The water vapours were found in the planet's atmosphere.

"We're thrilled to have identified clear signs of water on a planet that is trillions of miles away," said Giovanna Tinetti, a European Space Agency researcher and main author of NASA's study, at the Institute d’Astrophysique de Paris France.

The planet, termed a "wet Jupiter", takes approximately two days to orbit its sun and its surface temperatures are estimated to be at least 1,000 Kelvin (1,340 Fahrenheit/727 Centigrade) which, according to scientists, makes it unlikely that life would exist there. The presence of water was observed by using the telescope to examine the absorption spectra as the planet transited across its star.

"Finding water on this planet implies that other planets in the universe, possibly even rocky ones, could also have water," said co-author Sean Carey of NASA's Spitzer Science Center at the California Institute of Technology in Pasadena.

Similar evidence for another hot gas giant, previously gathered using the Hubble telescope, was not widely accepted due to experimental noise and similar concerns.

HD 189733b is located 63 light-years away from Earth in the constellation Vulpecula.