The whole point Jesus is obviously making is that one must be born again to enter the kingdom of God. The
only statement that speaks to physical birth is "what is born of the flesh is flesh." What is interesting is how so many of you are leaving out the context:
Joh 3:3 Jesus answered him, “Truly, truly, I say to you,
unless one is born again he cannot see the kingdom of God.”
Joh 3:4 Nicodemus said to him, “How can a man be born when he is old? Can he enter a second time into his mother's womb and be born?”
Joh 3:5 Jesus answered, “Truly, truly, I say to you,
unless one is born of water and the Spirit, he cannot enter the kingdom of God.
Joh 3:6 That which is born of the flesh is flesh, and that which is born of the Spirit is spirit. (ESV)
Notice the parallelism. In verse 5, Jesus appears to be just expanding on what he means in verse 3. That is, to be "born again" is to be "born of water and the Spirit." Jesus
first says, "Truly, truly, I say to you, unless one is born again he cannot see the kingdom of God.”
Then, Nicodemus responds, not understanding what Jesus was saying, thinking that it had something to do with physical birth. Jesus corrects Nicodemus and explains that being "born again" is to be "born of water and the Spirit."
While "what is born of the flesh is flesh" refers to natural birth, Jesus is not equating that with "born of water." He is merely answering Nicodemus's question, "Can he enter a second time into his mother's womb and be born?”.
On the one hand, for Jesus to say that one has to physically be born in order to enter the kingdom of God, would go without saying for those who are born. It would be to communicate nothing of importance; it would be a pointless statement. But notice also that "what is born of the flesh
is flesh." This precludes any understanding that physical birth is a necessary requirement to enter the kingdom of God. Flesh must be reborn by the Spirit; that is rather the whole point.
On the other hand, it would mean that all children lost to abortion and miscarriage could not enter the kingdom of God. That is,
if physical birth is necessary to enter the kingdom of God,
then any who are not physically born
cannot enter the kingdom of God. But that would be to deny that they are full human persons, which is unbiblical.
When we look at the rest of the passage, it is interesting that after Jesus's discussion with Nicodemus, it changes to Jesus and his disciples baptizing (vs. 22; see also 4:1-2). And we know it was with water because John the Baptist was baptizing in water (vs. 23); it also wouldn't make sense otherwise.
All that to say that it is most likely that "born of water" is speaking of water baptism, a baptism of repentance.