Atmospheric water vapor is one of the most fundamental meteorological parameters and plays important roles in local meteorology, global climate change, water cycling and atmospheric chemical process. As an active optical remote sensing technology, differential absorption lidar (DIAL) technique can measure atmospheric water vapor with high temporal and spatial resolution, and is widely used in the measurement of atmospheric water vapor profile. In this paper, the research progress of the H₂O-DIAL technique and its applications are reviewed comprehensively, and various H₂O-DIAL systems based on different laser sources, as well as frequency stabilization technique of laser, are described. In addition, the development trend of H₂O-DIAL technology and its application are prospected. In particular, it is pointed out that the tunable optical parametric oscillator and micro-pulse H₂O-DIAL at 935 nm band are developing rapidly, which is worthy of attention.