We introduce an electronically coarse-grained description of water representing all long range, many-body electronic responses via an embedded quantum oscillator. Leading-order response coefficients and gas phase electrostatic moments are exactly reproduced. Molecular dynamics, using electronic path integral sampling, shows that this framework is sufficient for a realistic liquid to emerge naturally with transferability extending further to nonambient state points and to the free water surface. The model allows the strength of many-body dispersion and polarization to be adjusted independently and these are found to have significant effects on the condensed phase. © 2013 American Physical Society.