1. Add the water, oil, egg, bread flour, sugar, salt, and yeast to the bread machine pan in the order recommended by the manufacturer.
2. Select the Dough cycle and start the machine.
3. When the cycle is complete, remove the dough and divide it into three equal pieces.
4. Roll each piece into a rope and braid them together. Place the braided loaf on a greased baking sheet.
5. Cover the loaf with a clean cloth and let it rise in a warm place for about 30 minutes, or until doubled in size.
6. Preheat the oven to 350°F (175°C).
7. Bake the challah in the preheated oven for 25-30 minutes, or until golden brown.
8. Remove from the oven and let cool on a wire rack before slicing.