Azure Kelp is a mid-tier crafting material in Hytale that you'll need to build teleporters, which form the backbone of fast-travel networks in your world. While collecting it is straightforward once you know where to look, finding it requires understanding which biomes and water bodies support its growth.
Quick answer: Search bodies of water in Azure Forests—the distinctive blue-tinted biomes found in the Emerald Grove zone. Look for ponds and rivers within these forests, and press F to harvest the glowing blue plants you find underwater.

Azure Forests: The primary source
Azure Forests are the most reliable location for gathering Azure Kelp. These biomes stand out immediately on your map with their dark blue coloring and small, round trees. When you arrive, all vegetation takes on that characteristic blue hue, making the biome unmistakable.
Within these forests, search for any body of water: small ponds scattered throughout, rivers cutting through the terrain, shallow lakes near tree clusters, or hidden pools tucked behind rock formations. Not every water source contains kelp, so you may need to check multiple locations within the same forest to find a productive area.
The kelp itself appears as a glowing blue plant beneath the water surface. Often, parts of it poke above the waterline, making it visible from the shore. Simply swim down, approach it, and press F to collect it. You won't need any special tools or equipment to harvest it.

Desert oases: An alternative location
Azure Kelp also grows in desert oases, though spawns are less frequent than in forests. These oases appear as isolated blue pools within the Howling Sands, the second zone in Hytale. Using your map, locate small clusters of trees and water deep in the desert—these mark potential oasis locations.
While oases provide a secondary source of kelp, Azure Forests remain the more efficient farming location due to higher spawn rates and the ability to harvest Azure Logs from the same biome simultaneously.

Efficient farming strategy
Open your map and identify all blue-shaded forest regions before traveling. This prevents wasted time and ensures you head directly to confirmed kelp-spawning areas. Once you locate a productive forest, search systematically through every water source you encounter.
Since Azure Logs grow on the same blue trees in these forests, bring an axe to harvest both materials during a single trip. This maximizes efficiency, as you'll need eight logs alongside two kelp to craft a single teleporter. Kelp respawns over time, so revisiting previously harvested locations yields additional resources on subsequent visits.

Crafting teleporters with your kelp
Once you've gathered Azure Kelp, you can craft teleporters at an Arcanist's Workbench. Each teleporter requires two Azure Kelp, eight Azure Logs, and ten Stone. These teleporters let you establish fast-travel connections between distant locations, dramatically reducing travel time across your world. You can name each teleporter and link them to specific destinations for easy navigation.