A capacitance-type sensor whose sensitivity is sufficiently high to detect liquid water droplets in a stream of gas with very low moisture content is described. Instantaneous capacitance is measured for a probe consisting of two closely spaced parallel plates through which a two-phase mixture is flowing; the presence of liquid within the sensor’s active volume generates a measurable capacitance increase due to the much higher dielectric constant of liquid water compared with gas or steam. Proof-of-concept experiments were carried out to determine the relative effects of droplet size, velocity, and position on the output of the sensor. The probe detected individual water droplets in the range of 7.5 to 20.0 μl and had a voltage output that was linear with droplet volume in this range. In addition, the signal pulse width was found to be a sensitive indicator of droplet velocity. The data indicate that the probe can be used to measure the moisture fraction of a high-quality gas flow in the range from 0 < β <0.013 (liquid volume/total volume) with a maximum standard deviation of ∼0.001.