An improved air compressor powered by water having an automatic water valve regulation mechanism. The air compressor includes a resiliently biased piston within a liquid chamber and a ram within a compression chamber, the ram being conjoined with the piston. Inlet and outlet valves for controlling the flow of water with respect to the liquid chamber are provided in one end of the compressor. Ports for the inlet and outlet valves are preferably aligned parallel to the axis of piston reciprocation such that water flows through the ports in the same direction as the direction of piston movement. The automatic valve regulation mechanism includes a positioning disc and positioning spring, together holding each of the water valves in one of two positions. The regulation mechanism further includes a drive shaft connecting the water valves and the positioning disc to pivot in unison between the two positions, a drive disc pivotally mounted for depressing the positioning spring, and a coil spring connected between the drive shaft and the drive disc. The regulation mechanism also includes a trip rod having one end connected to the drive disc and having a pair of spaced apart stops along its length for contact with the piston at each end of the piston travel.