An exoplanet refers to a planet beyond our solar system.
Astronomers at the Centre for Space Exochemistry Data at the University College London used data from NASA's Hubble Space Telescope to make the discovery.
If confirmed by further studies, this will be the only exoplanet known to have both water in its atmosphere and temperatures that could sustain liquid water on a rocky surface.
Liquid water would only be possible if the planet turns out to be terrestrial in nature, rather than resembling a small version of Neptune.
Given the high level of activity of its red dwarf star, K2-18b may be more hostile to life as we know it than Earth, as it is likely to be exposed to more high-energy radiation.
The planet, discovered by NASA's Kepler Space Telescope in 2015, also has a mass eight times greater than Earth's. That means the surface gravity on this planet would be significantly higher than on our planet.
The team used archive data from 2016 and 2017 captured by Hubble and developed open-source algorithms to analyze the host star's light filtered through K2-18b's atmosphere.
The results revealed the molecular signature of water vapour, and also suggest the presence of hydrogen and helium in the planet's atmosphere.
The authors of the paper, published in the journal Nature Astronomy, believe that other molecules, including nitrogen and methane, may be present but they remain undetectable with current observations.
( With inputs from IANS )