The effect of varying the water vapor content in a DC magnetron sputtering process was investigated for zinc oxide film formation. The plasma parameters near the substrate surface were measured using a single Langmuir probe, and the deposited films were characterized using X-ray diffraction, X-ray reflectivity, optical transmittance, and 4-point probe methods. In the region near the substrate surface, the addition of water changes the plasma properties, and the measured plasma parameters showed the changes corresponding to the transition in the film growth mechanism from Zn to ZnO. Depositing at 40% water content resulted to a highly transparent film with a ρ of 1.20 Ω cm. The band gap of films deposited at 40 to 100% settings ranged from 3.36 to 3.34 eV, which matches the expected shallow hydrogen donor doping in ZnO.