A toy water gun having a water supply tank which can be filled with water, and a water pump located on the housing for pumping water from the supply tank to at least one water pressure chamber. The water pressure chamber includes at least one fixed wall, and a moveable wall which substantially sealingly engages the at least one fixed wall and is slidable away from a first end wall as water is pumped into the water pressure chamber and toward the first end wall as water is discharged. An air pressure chamber located on an opposite side of the moveable wall from the water pressure chamber and is pressurizable with compressed air to bias the moveable wall toward the first end wall. An air pump is connected to the air pressure chamber for pressurizing the air pressure chamber with a user desired air pressure. Upon actuation of the release valve, the air pressure acts on the moveable wall to force water under pressure from the water pressure chamber so that a stream of water is ejected from the nozzle.