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An acid-base reaction produces water because the hydrogen ion from the acid combines with the hydroxide ion from the base:

This reaction is called a neutralization reaction and also produces a salt.

Explanation
Acids are substances that give away protons in a solution, while bases are substances that accept protons. The reaction occurs in water because the hydrogen and hydroxide ions are the products of water dissociation.

Acid-base reactions are reversible, meaning that the products of the reaction can interact to regenerate the starting materials. This is because the reaction reaches a point of balance, or equilibrium, where the starting materials and products are regenerated as quickly as they are consumed.