Water dragons are creatures that inhabit bodies of water. They are known to carry a specific kind of parasite that can also be transmitted to humans (CG).
In 1927, Newton Scamander speculated that there might be a water dragon living in the Parisian sewer used by Yusuf Kama as an hideout, after discovering and successfully removing a water dragon parasite from the latter's eyes (CG).
Commentary
Notes
This species of dragon is not mentioned in Newt Scamander's book Fantastic Beasts and Where to Find Them. It is possible that the creature is not an actual reptilian dragon at all. The name may simply be appropriated for the name the way it is for the dragonfly. The Liondragon of China is not a lion, even though the word is used as part of its name. Dragon's milk cheese is made from a form of strong beer sometimes called Dragon's Milk, since dragons, being reptiles, do not give milk. --SVA