To flood lower parts of map with water, you need to go firstly to the Terrain Tab and click on the Water button, then place the cursor on the map. Finally press the left mouse button to start increasing the water level. Holding the left mouse button pressed causes continuous water rising. To reduce water level you must simultaneously hold the left mouse button and the SHIFT key pressed.

In  case you should happen to flood a greater area than you intended to, you can use the Undo option. You can also remove all the water by pressing  the  Delete Water button.