Waterleaf Seeds can be found in the desert biome when harvesting Waterleaf plants, but only when the conditions are right. Only a blooming Waterleaf plant will yield seeds when harvested. Waterleaf will only bloom when it's raining.
The easiest way to do this when attempting to procure your initial seeds out in the desert is to wait until it rains, then head to the desert. Now, when you harvest the Waterleaf, it will also drop Waterleaf Seeds.
Waterleaf Seeds can be placed in empty Clay Pots, or in Sand, and grown into additional Waterleaf plants which can be harvested. Potted Waterleaf will grow anywhere, not just in the Desert biome, but will only yield seeds if it's raining.
The plant emits faint blue sparkles when ready to harvest.