The "tremendous" growth rate of vapour products is due to increased popularity in North America, particularly the US, and European countries including the UK, a new report by Beige Market Intelligence suggests.
In the UK, 12m adults smoke cigarettes and 2.6m use vapour products. Of those, 700,000 are ex-smokers and 1.3m are using both tobacco and vapour products.
The value of the traditional tobacco cigarette market is still 20 times larger than vapour products at $22-25bn, (£17-19bn), the report said.
Beige valued the vapour market in the UK at $1.16bn (£913m) in 2015 but predicted its growth rate would slow and it would reach $5.67bn (£4.46bn) by 2021.
The UK Vaping Industry Association (UKVIA) said retail sales in the country are worth around £600m, and the positive influence of public health bodies has helped the market.
"With a wide recognition that smokers want alternative products, we believe that there is an opportunity and demand that vaping products can meet," a UKVIA spokesperson said.
E-cigarette growth took off in 2014 as new technology was developed, major acquisitions took place and government regulations were introduced.
Tobacco companies are now dedicating significant portions of their budgets to the research and development (R&D) of e-cigarettes, the report said.
Reynolds American increased its R&D spending by 27 per cent in 2015 to invest in and develop alternative tobacco products, and British American Tobacco (BAT) has invested $5bn in R&D of its next-generation products over the course of five years.
Last month, Philip Morris International, the world's largest international tobacco company, said it could eventually stop selling traditional cigarettes altogether following the launch of its tobacco heating product in the UK.
Major players in the worldwide e-cigarette market include Altria Group (which owns Philip Morris USA), BAT, Imperial Tobacco, Japan Tobacco International and Reynolds American.
As the big tobacco companies enter the market, small players may face a challenging competitive environment, the report said.
The e-cigarette market is also a place for innovation, with new flavours, more advanced and powerful vaping devices and Bluetooth-enabled e-cigarettes in the works.