Underwater provinces cannot be entered by units without a special ability that allows it (such as amphibian, aquatic, or waterbreathing), they do not contribute resources to forts on land, cannot be crossed by flying units, and only one water province may be traversed in a turn. The exception to this is units with sailing: they may cross water provinces, but may not remain there at the end of a turn. If a unit that can't breathe underwater is given an item, such as the Shambler Skin Armor or Barrel of Air, that allows it to go underwater and then that item is removed, the unit will automatically die. Same if the unit teleports underwater.
As well, underwater slashing and blunt weapons have an attack penalty equal to weapon length, while piercing weapons do not. If a weapon does both piercing damage as well as another type, the underwater penalty is halved. Being underwater also halves the chance at stopping Profuse Bleeding
There is a reduced chance for dominion from land provinces to go underwater, and vice versa.