Sugar Cane

Info
Bamboo/Papyrus was added in the v1.0.11 patch.

Bamboo/Papyrus grows near water when placed on grass or dirt tiles. It grows quickly to a maximum height of three blocks, but can have more papyrus(or other blocks)placed on top of it if desired.

Removing the bottom part causes all parts above it to be removed as well, allowing for quick harvesting; one can also "shave" off the upper sections and leave the bottom section planted. It can be crafted into paper.

Farming bamboo/papyrus is akin to farming crops, they grow on grass/dirt, and must be near water. Like the real plant, bamboo/papyrus must be planted on a grass/dirt block immediately adjacent to water, instead of being within four blocks of water. Diagonal blocks, as well as blocks above or below the water stream, won't allow it to be placed.Unlike wheat,It does not requires a tilled field for growth.

Bamboo/Papyrus can be found randomly on a dirt block next to the water, similar to Cactus. There appears to be no pattern to the spawn algorithm.

Controversy
Some have claimed the material to be papyrus, which has famously been used to make paper as early as 4000 BC. However, bamboo paper is the direct predecessor to modern paper invented by the Chinese in 104 A.D. It is easier to make paper out of bamboo, and the art supports the theory that this is bamboo.