In 1763, while repairing a Newcomen engine, he found he could greatly improve the machine. His invention of the 'separate condenser' and the introduction of crank movements could make steam engines more efficient.

After other improvements, he went into partnership with Matthew Boulton, and the new steam engine was manufactured at Birmingham in 1774. Several other inventions followed, including the double-acting engine, the centrifugal governor for automatic speed control, and the pressure gauge.

With this invention he provided one of the most essential components of early industrial revolution. The term horse-power was first used by him, and the power unit, the watt, is named in his honor.