This study investigated the manufacture of thermoplastic composite parts by a novel water-assisted injection-molding technology. A water injection unit, which included a water pump, water injection pin, control circuit, and water tank equipped with a temperature controller, was developed in our laboratory. Experiments were carried out on an 80-ton reciprocating injection-molding machine equipped with the lab-developed water injection unit. The materials used in the study were short glass-fiber filled polypropylene composites. To optimize the molding process, an experimental study, based on the Taguchi orthogonal array design, was conducted to characterize the effect of different processing parameters on the water-assisted injection-molding of thermoplastic composites, including melt temperature, mold temperature, short-shot size, water pressure, water temperature, and water injection delay time and hold time. After molding, the length of water penetration in the molded composites was determined. For the factors selected in the main experiments, short-shot size and water injection delay time were found to be the principal parameters affecting the manufacturing of water-assisted injection-molded composites. Internal rough surface was observed in molded parts. Composites molded by water-assisted injection-molding were found to have a shorter cycle time than those molded by gas-assisted injection-molding. In addition, the glass fibers in molded parts were found oriented mostly in the flow direction of the polymer melt. A moldability diagram was also developed based on the statistical results to give a first guideline for system optimization.