When she succeeds in acquiring one silver shoe by making Dorothy trip over an invisible bar, the little girl angrily throws a bucket of water onto the Wicked Witch. This causes the old witch to melt away. The Wicked Witch's dryness was enumerated in some clues before this. Furthermore, when Toto had bitten her, she had not bled; her wickedness had dried her up long ago. Unfortunately, L. Frank Baum did not explain precisely why water had this effect on her, nor did he ever imply that all evil witches could be likewise destroyed.

Source: Wikipedia