Vertical distribution of water vapor in the Martian lower atmosphere (0–40 km) is an important characteristic of the Martian water cycle. It reflects a complex interplay between various processes shaping the contemporary water cycle, including atmospheric transport, formation of water ice clouds, sublimation of surface frost, and possible interaction with the subsurface. Despite the growing dataset of water vapor observations, there is yet no comprehensive climatology of the vertical distribution of vapor. Limb and solar occultation observations that are typically used to retrieve vapor vertical distribution are much less numerous than nadir observations and are available for limited seasons and locations. We propose a new methodology to retrieve vertical distribution of water vapor in the Martian lower atmosphere using only nadir data. The methodology is based on the observation that infrared spectra collected over same location during different parts of day are sensitive to water vapor in different parts of the atmosphere. We validate our new methodology by applying it to infrared spectra simulated for realistic Mars environments created with Mars General Circulation Model (GCM). These tests show that vertical profiles of vapor can be recovered with accuracy ~20–40%, which is comparable to accuracy of limb and occultation observations. Importantly, the new retrieval algorithm can constrain near-surface (0–10 km) vapor abundances that cannot be observed by limb and occultation techniques. Application of this new methodology to a large dataset on Martian nadir spectra, such as the one collected by the Thermal Emission Spectrometer (TES) onboard Mars Global Surveyor (MGS) during its mission in 1999–2004, can result in the development of the detailed climatology of vapor vertical distribution on Mars. As an initial step toward this goal, we apply the new retrieval methodology to a subset of nadir spectra collected by MGS TES during one Martian year. The retrieved vapor profiles are qualitatively consistent with vapor distributions predicted by the GCM for different seasons. Differences between retrieved and simulated profiles can be interpreted as reflecting wetter Martian atmosphere and weaker atmospheric transport, during some seasons. Retrieved vapor distribution during southern summer suggests disruption of atmospheric vapor transport into southern extra-tropics following a global dust storm.