Cream butter in a large mixing bowl; add sugar, beating well. Add eggs, one at a time, beating well after each addition. Add water; beat well.
Combine flour, cocoa, soda, and salt; add to creamed mixture alternately with milk, beginning and ending with flour mixture. Mix well after each addition. Stir in vanilla.
Pour batter into 2 greased and floured 9-inch round cake pans. Bake at 350° for 25 minutes or until a wooden pick inserted in center comes out clean. Cool in pans 10 minutes; remove layers from pans, and let cool completely.