Talk to Ser Maximilian, outside the Gran Soren Castle Gates.

He has options for different quests, such as:
Investigate a Cult
Aid a Research Team
Hear the Duke's Directive

(If you don't see those options, make sure you have the Wyrm Hunt License on you)

Choose to Aid a research team.

This begins the quest:

The Watergod's Altar
Speak with Father Geffrey

Wyrm Hunt Quest
Protect a survey party investigating ruins that may offer new insights on the dragon

Meet father Geffrey in Gran Soren cathedral for information on the Survey Mission.

Head to the Cathedral, to the east. Talk to Geffrey. He tells you the Survey Party has already set out from Gran Soren. They walk south, to the ruins at the falls, near the encampment. He wants you to escort them. Your task now is to meet with the survey party.

Travel south on the road from Gran Soren towards the red marker. You will probably have to jump down to a ridge at the end, and cross a small stream of water. When you reach Man Swallowing Falls, speak with Haslett, from the party sent to survey the ruins. He has seen no sign of Brother Jean, who had gone ahead. He asks you to find Jean and see to it that he is safe.

Your task now is to find the missing brother. Go west, under the Waterfall, and enter the Watergod's Altar. Light the lantern to illuminate the way. There are bats and rats near the entrance. Work your way through the narrow tunnels. You reach a room with a raised bridge, and two staircases; one side is flooded, go down the other, and climb a ladder down. There is a chest there. Continue down the cave and fight a big group of Saurians. Then, enter some sort of treasure chamber with a lot of chests in it. One of them has the Watergod's Altar Lever. You might also find a Ferrystone here. A Ferrystone will spirit you back to Gran Soren in an instant, no matter where you are located. It is by far the fastest and safest method of travel, but each stone disappears after a single use.

 Go back to the hall with the raised bridge and use the Watergod's Altar Lever to lower the bridge. Cross the bridge into a big room with more Saurians as well as Skeleton Mages, including one guarding a chest. Careful not to fall into the water, as the fall might kill you.

Defeat all the enemies, and cross into the next room, where you will be fighting a Cyclopes. The cyclops has an important drop:

Watergod's Altar Key
Key to the sunken ruins, pried from the hand of a dead monk.

Then, enter the Offering Chamber, a room full of pillars. This room has a lot of chests, although what you are after is a certain area in the room, marked on the minimap. There you find Brother Jean's body. You need to report Jean's Demise to Haslett.

Return to Haslett and talk to him. Haslett asks you to finish what Brother Jean started, to investigate the ruins yourself. Enter the Watergods Altar again and make your way to some sort of door with ornaments. Use the key you found on Brother Jean to open it. Go down the stairs, where you will fight some Skeleton Knights.

Find a pressure plate that drains the water. Five new red markers appear on your minimap. Go back up, and then down into the area that was previously flooded. Enter an area called Water's Bottom.
You need to find Altar Slates:

Altar Slate
One of a number of pieces scattered about the sunken ruins. The writing on it must be deciphered.

They are located inside chests where the waypoints are. You will run into another Cyclops during this search, so be prepared.  Once you have found all five slates, exit the dungeon and talk to Haslett. Hand over the five Altar Slates. Then, you need to go back to Gran Soren and report your findings to Ser Maximillian.

This completes the quest, The Watergod's Altar.