Waterleaf

Waterleaf was introduced in the 1.0.5 patch.

It appears as a very small, aqua-colored sprout. It grows in Desert Biomes (right in the Sand, no less) and can be cut with virtually any weapon or tool. Can also be planted in Clay Pots using Waterleaf Seeds.

Waterleaf is a finicky plant, and will only bloom if it's submerged in water. Using Water Buckets and Clay Pots in an enclosed area is one option. When fully grown and watered, it will bloom and its appearance will change, becoming larger and speckled with aqua leaves.

Harvesting it while it is blooming will drop 1-3 Waterleaf Seeds.