Liquid‐phase discharge has the advantages of high plasma density, simultaneous generation of multiple physical and chemical effects, and high gas‐liquid mass transfer efficiency. However, the large‐capacity treatment of liquid by plasma has always been a research difficulty. In this study, liquid‐phase continuous arc (LCA) discharge plasma is realized for the first time, which can quickly propagate for a long distance in liquid. To better understand this new type of liquid‐phase discharge, the time‐space characteristics, electrical characteristics, optical characteristics and particle characteristics of the LCA discharge plasma are diagnosed. The results show that the LCA discharge plasma can achieve a rapid propagation over 1 m in the liquid, and the propagation time is on the order of milliseconds. Meanwhile, the discharge can directly generate a variety of active species (·OH, ·O, ·H, H2O2) in the liquid, which can be continuously produced as the plasma moves. The LCA discharge plasma has good application prospects in water treatment, energy conversion, and so on.