An experimental system of AC arc discharge in water was designed with pole-pole electrodes and a peak voltage of 1500 V and a test circuit was set up using virtual instrument technology. The mechanism of an AC plasma arc generated in water was analyzed. The voltage- current characteristic of the AC plasma are was obtained from the waveform. The temperature characteristic was tested with a spectrum diagnosis system, and the effect of different electrode materials on the striking voltage and peak current was analyzed. The results show that when a power supply of 6 kW is applied on electrodes with a gap of 2 mm in water, the striking voltage is from 900 V to 1300 V, the arc voltage is from 40 V to 100 V, the arc current is from 2 A to 7 A, and the zero rest period is from 1 ms to 2 ms. In addition, the arc voltage and current are different for electrodes in aluminum, copper and stainless steel. The arc voltage is lower and the current is higher for an aluminum electrode than those for copper and stainless steel ones. The highest temperature of the arc is 7643 K.