"This sword is not well-known. According to legend it has more power than imaginable."

This is a secret weapon the Prince can obtain at the end of Warrior Within.

The Prince can obtain it by activating all the nine life upgrades. Each life upgrade, once activated. sends a process through the mechanical tower which allows one out of nine digits forming a circle to glow white. When all the life upgrades are activated and the digits forming the circle glow, the mechanical tower opens a pit in the middle of the circle, and the Water Sword rises out. This is the most powerful sword in Warrior Within and the only one strong enough to kill the Dahaka, and when near the sword starts to glow blue.

It is unknown what happens to the sword after the conclusion of Warrior Within; but if the Prince took it with him to Babylon, then it was lost in the harbor when his ship was sunk in the Two Thrones.