Place all meatball ingredients in a large bowl and mix until all ingredients are thoroughly combined. Roll meat mixture into small bowls the size of a heaping tablespoon and place onto a rimmed baking sheet. Pour water in the baking pan to come about halfway up the sides. Carefully transfer to the oven and bake until meatballs are cooked, about 15 to 20 minutes.
Meanwhile, prepare sauce by whisking together all sauce ingredients in a small saucepan. Cook sauce over medium-high heat, stirring constantly, until well combined and slightly thickened. Remove meatballs from water in baking pan and place in sauce, gently mix to coat. Serve.