Laser underwater cutting of 1 mm thick 304 stainless steel is demonstrated by a fiber-transmitted laser beam aided by high pressure argon gas. In order to evaluate cutting efficiency and quality via average kerf width, laser underwater cutting is carried out by changing the parameters of laser power, cutting speed, thickness of the water layer, salinity and temperature of the water. On a macro level, lower laser power, faster cutting speed and thicker water layer decrease laser cutting efficiency and quality. Meanwhile, high salinity and low temperature of water decrease laser cutting efficiency as well. On a micro level, metallographic structure and microhardness of the fusion zone, heat affected zone (HAZ) and substrate are different. Nucleation is detected on the surface of fusion zone. High laser power density promotes crystal grain growth. The microstructure in HAZ is coarse. The microhardness of HAZ is lower than that of the substrate and fusion zone. Microhardness of the outer surface of the fusion zone is 242.8 HV with some oxidized zone showing a hardness of 963 HV, 4.3 times of the substrate. While those of the middle part of the fusion zone, HAZ and substrate are 165.1, 124.6 and 223.4 HV, respectively.