Mechanical foaming has become the most popular method for producing warm-mix asphalt in the United States. The process of mixing cold water with hot binder results in volume expansion and subsequent viscosity reduction of the binder, which is likely to produce a better coating of the aggregates along with improved overall mixture workability. Although mechanical foaming has been widely used in recent years, questions persist regarding the effects that different amounts of water have on binder foaming characteristics and foamed mixture properties. This study developed a novel, noncontact method to measure the expansion and collapse of foamed binder during the foaming process and the evolution of the size and amount of foam bubbles over time. Two parameters were proposed for evaluating the effect of water content on binder foaming characteristics. In addition, the effect of water content on the foamed mixture properties of workability and performance was investigated. The test results indicated that the amount of water used in the foaming process had a significant effect on binder foaming characteristics and foamed mixture properties. The optimum foaming water content could be determined through evaluation of the workability of foamed asphalt mixtures produced at different foaming water contents. Compared with hot-mix asphalt mixtures, equivalent or better performance in laboratory tests was observed for plant-produced and laboratory-produced foamed mixtures at the optimum water content.