The detection and measurement of vapour-phase or liquid-phase water is important in many industrial and chemical processes. Water exhibits strong absorption bands compared to other substances in the near infrared (NIR), and for this reason NIR spectroscopy is especially well suited to moisture determination. A lack of suitable sources in the NIR, however, has impeded the application of optical sensors to water detection. We have developed a modulatable IR source for use in a moisture sensor. In the system, the luminescent emission from optically pumped rare earth doped glasses is used. Thulium doped zirconium fluoride glass, which luminesces at 1.83 mm was the material chosen. The spectral overlap with the water absorption band is significant, and the output stability matches that of the pump source, which is typically an internally modulated diode laser emitting at 685nm. The detection system uses a reference beam and a probe beam to monitor changes in absorption due to moisture or water vapour. Results illustrating the effectiveness of the novel IR source in a sensor platform to measure trace amounts of liquid water and water vapor will be presented.