How to get the Umbra Sword - Elder Scrolls: Morrowind
Location: East of Suran
Video: How to get Umbra's Sword
The Umbra Sword is obtained by defeating Umbra in combat and looting the sword from his cold dead hands. You'll find Umbra a tad bit northeast of Suran - just over the hill. If you are standing in Suran and you use Levitate you can easily reach Umbra's location, that's how close he is.
When you speak with Umbra he says he just wishes to die a warrior's death in combat. This will begin the Umbra Side Quest which is basically just a few Journal entries for talking to him and killing him. A tip if you're trying to take down Umbra early in the game, you can drink enough alcohol to give yourself a couple hundred Strength with Fortified Strength buffs then two or three shot Umbra. This will allow you to get a very powerful sword as early as level 1.