I believe water on the knee is fluid in the bursa sack. Your doctor should recommend that you rest your knee (elevate it), and apply ice to it. If the fluid is extensive, the doctor may extract some of the fluid with a needle which would immediately ease the pain and swelling.
Treatment dependa on what the cause is. For example, if it's infection, antibiotics might work. Also, pain medication, elevation and ice packs, and maintaining a healthy weight might work.
