A continuous cotton-like carbon nanotube fiber yarn, consisting of multiple threads of high purity double walled carbon nanotubes, was fabricated in a horizontal CVD gas flow reactor with water vapor densification by the direct chemical vapor deposition spinning process. The water vapor interaction leads to homogeneous shrinking of the CNT sock-like assembly in the gas flow. This allows well controlled continuous winding of the dense thread inside the reactor. The CNT yarn is quite thick (1-3 mm), has a highly porous structure (99%) while being mechanically strong and electrically conductive. The water vapor interaction leads to homogeneous oxidation of the CNTs, offering the yarn oxygen-functionalized surfaces. The unique structure and surface of the CNT yarn provide it multiple processing advantages and properties. It can be mechanically engineered into a dense yarn, infiltrated with polymers to form a composite and mixed with other yarns to form a blend, as demonstrated in this research. Therefore, this CNT yarn can be used as a "basic yarn" for various CNT based structural and functional applications.