To investigate the effect of water on the fracture mechanism and associated acoustic emission (AE) characteristics, triaxial compression experiments were performed on dry and water-saturated tight sandstone specimens sampled from the Sichuan Basin, China. The saturated specimen was precisely controlled by different drainage conditions at the two ends. The detailed spatiotemporal distribution of AE activities and the P-wave velocities were used to examine the initiation and propagation of microcracks, as well as fault nucleation process. There are significant differences in mechanical behavior, P-wave velocity, AE activities, and fault nucleation between the dry and saturated specimens. The mechanical behavior of the saturated specimen is characterized by water weakening, with 10% and 26% reductions in peak strength and elastic modulus, respectively, in comparison with those for the dry specimen. Water enhances inelastic axial deformation and strain softening. The evolution of P-wave velocity is associated with microcracking-induced dilatancy. The decrease in P-wave velocity is suppressed in the saturated specimen, especially at the drained end. Significant attenuation of AE energy is observed in the saturated specimen, resulting into a lower event rate compared with that for the dry specimen. It is shown that the saturated specimen has an extended fault nucleation duration and lower rupture velocity. The precursory phase of dynamic failure can be clearly mapped based on strain softening, accelerating AE event rate, and decreasing b-value, as well as decreasing pore pressure (in undrained condition) or increasing injection rate (in drained condition).