The dynamic arc behaviors have a significant effect on the process stability and welded joint quality in underwater wet flux-cored arc welding (FCAW). In this study, clear underwater arc images are obtained by using a high-speed camera, which further reveal the complex physical process of underwater wet welding. The mechanism of underwater contact arc ignition is described in detail. Gas ionization and electron emission processes are carried out in bubbles generated by resistance heat. The dynamic arc behaviors are obviously different between bubble growth and separation stages. The high-speed gas flow in the bubble separation stage has a great disturbance to the arc. The arc shapes under water and in air under the same parameters are compared, and the mechanism of arc column shrinkage and arc length shortening is revealed from the aspects of water environment cooling, gas composition in bubbles, disturbance of gas flow, water pressure, and electric field strength.