Isolate the area that has been damaged with water. Look for discoloration and softened areas both on the wall and the ceiling. Sometimes water can drip down from the roof or overhead pipes. Call a professional if you're having trouble.
Cut out the wet drywall to start circulating air through the opening. This requires a high-intensity fan that can be purchased from a hardware store or rented from a professional restoration company. A dehumidifier should also be turned on to help draw moisture away from the wall.
Monitor the drying process closely. If you can still detect moisture after twelve hours, you may need to cut more of the wall so that airflow can get to it. If you don't keep a close eye on the moisture levels, mold can develop easily from the water damage and cause some costly problems.
Replace the drywall once everything dries out by re-installing any studs that may have been compromised and placing a new drywall patch over the hole. If the hole is very large, first install a plywood backer board onto the studs that will hold the new drywall in place.
Nail in your drywall patch (preferably a water-resistant type) to the backer board and then spread joint compound over the edges using a putty knife. Sand down any depressions that appear. If the leak occurred near the floor, leave a small clearance between the drywall and the floor to protect your wall in case of another leak.
Tape off the joint where the drywall meets the existing wall using drywall tape that can be purchased at your local hardware store. Once you have a smooth finish, you can paint the new drywall to match everything else.