Aims. Various scenarios have been proposed to explain the presence of silicate features associated with carbon stars, such as V778 Cyg. We have attempted to constrain these theories by means of mapping water maser emission from V778 Cyg. Methods. The 22 GHz water maser emission from this star has been mapped using MERLIN with an astrometric accuracy of 25 mas. Results. The spatially- and kinematically-resolved maser complex is displaced by similar to 190 mas from the position of the C-star as measured 10 years earlier using Tycho. Our simulations and analysis of available data show that this position difference is unlikely to be due to proper motion if V778 Cyg is at the assumed distance of 1.4 kpc. The maser components seem to form a distorted S-shaped structure extended over similar to 18 mas with a clear velocity gradient. We propose a model which explains the observed water maser structure as an O-rich warped disk around a companion of the C-star in V778 Cyg binary system, which is seen almost edge-on. Conclusions. Analysis of observational data, especially those obtained with MERLIN, suggests that V778 Cyg (and, by implication, other silicate carbon stars) are binary systems composed of a C-rich star and a companion which stores circumstellar O-rich material.