diff --git a/homeassistant/components/demo/water_heater.py b/homeassistant/components/demo/water_heater.py
index 7bc558a2ae4..9e12bb9e1d5 100644
--- a/homeassistant/components/demo/water_heater.py
+++ b/homeassistant/components/demo/water_heater.py
@@ -30,10 +30,15 @@ async def async_setup_entry(
     async_add_entities(
         [
             DemoWaterHeater(
-                "Demo Water Heater", 119, UnitOfTemperature.FAHRENHEIT, False, "eco"
+                "Demo Water Heater", 119, UnitOfTemperature.FAHRENHEIT, False, "eco", 1
             ),
             DemoWaterHeater(
-                "Demo Water Heater Celsius", 45, UnitOfTemperature.CELSIUS, True, "eco"
+                "Demo Water Heater Celsius",
+                45,
+                UnitOfTemperature.CELSIUS,
+                True,
+                "eco",
+                1,
             ),
         ]
     )
@@ -52,6 +57,7 @@ class DemoWaterHeater(WaterHeaterEntity):
         unit_of_measurement: str,
         away: bool,
         current_operation: str,
+        target_temperature_step: float,
     ) -> None:
         """Initialize the water_heater device."""
         self._attr_name = name
@@ -74,6 +80,7 @@ class DemoWaterHeater(WaterHeaterEntity):
             "gas",
             "off",
         ]
+        self._attr_target_temperature_step = target_temperature_step
 
     def set_temperature(self, **kwargs: Any) -> None:
         """Set new target temperatures."""
diff --git a/homeassistant/components/water_heater/__init__.py b/homeassistant/components/water_heater/__init__.py
index c9155950680..f2038def79c 100644
--- a/homeassistant/components/water_heater/__init__.py
+++ b/homeassistant/components/water_heater/__init__.py
@@ -77,6 +77,7 @@ ATTR_OPERATION_MODE = "operation_mode"
 ATTR_OPERATION_LIST = "operation_list"
 ATTR_TARGET_TEMP_HIGH = "target_temp_high"
 ATTR_TARGET_TEMP_LOW = "target_temp_low"
+ATTR_TARGET_TEMP_STEP = "target_temp_step"
 ATTR_CURRENT_TEMPERATURE = "current_temperature"
 
 CONVERTIBLE_ATTRIBUTE = [ATTR_TEMPERATURE]
@@ -154,6 +155,7 @@ CACHED_PROPERTIES_WITH_ATTR_ = {
     "target_temperature",
     "target_temperature_high",
     "target_temperature_low",
+    "target_temperature_step",
     "is_away_mode_on",
 }
 
@@ -162,7 +164,12 @@ class WaterHeaterEntity(Entity, cached_properties=CACHED_PROPERTIES_WITH_ATTR_):
     """Base class for water heater entities."""
 
     _entity_component_unrecorded_attributes = frozenset(
-        {ATTR_OPERATION_LIST, ATTR_MIN_TEMP, ATTR_MAX_TEMP}
+        {
+            ATTR_OPERATION_LIST,
+            ATTR_MIN_TEMP,
+            ATTR_MAX_TEMP,
+            ATTR_TARGET_TEMP_STEP,
+        }
     )
 
     entity_description: WaterHeaterEntityDescription
@@ -179,6 +186,7 @@ class WaterHeaterEntity(Entity, cached_properties=CACHED_PROPERTIES_WITH_ATTR_):
     _attr_target_temperature_low: float | None = None
     _attr_target_temperature: float | None = None
     _attr_temperature_unit: str
+    _attr_target_temperature_step: float | None = None
 
     @final
     @property
@@ -206,6 +214,8 @@ class WaterHeaterEntity(Entity, cached_properties=CACHED_PROPERTIES_WITH_ATTR_):
                 self.hass, self.max_temp, self.temperature_unit, self.precision
             ),
         }
+        if target_temperature_step := self.target_temperature_step:
+            data[ATTR_TARGET_TEMP_STEP] = target_temperature_step
 
         if WaterHeaterEntityFeature.OPERATION_MODE in self.supported_features:
             data[ATTR_OPERATION_LIST] = self.operation_list
@@ -289,6 +299,11 @@ class WaterHeaterEntity(Entity, cached_properties=CACHED_PROPERTIES_WITH_ATTR_):
         """Return the lowbound target temperature we try to reach."""
         return self._attr_target_temperature_low
 
+    @cached_property
+    def target_temperature_step(self) -> float | None:
+        """Return the supported step of target temperature."""
+        return self._attr_target_temperature_step
+
     @cached_property
     def is_away_mode_on(self) -> bool | None:
         """Return true if away mode is on."""
diff --git a/tests/components/demo/test_water_heater.py b/tests/components/demo/test_water_heater.py
index 48859610d39..257e1ab5ffb 100644
--- a/tests/components/demo/test_water_heater.py
+++ b/tests/components/demo/test_water_heater.py
@@ -43,6 +43,7 @@ async def test_setup_params(hass: HomeAssistant) -> None:
     assert state.attributes.get("temperature") == 119
     assert state.attributes.get("away_mode") == "off"
     assert state.attributes.get("operation_mode") == "eco"
+    assert state.attributes.get("target_temp_step") == 1
 
 
 async def test_default_setup_params(hass: HomeAssistant) -> None: