The 26-year-old has agreed a five-year contract to join the Hornets for an undisclosed club-record fee, becoming Marco Silva's seventh signing as Watford manager.
Gray scored nine goals and produced three assists in 32 Premier League appearances last season.
He could feature in Watford's first match of the season, at home to Liverpool on Saturday 12 August, kick off 12.30pm BST.
Thank you for the welcome @WatfordFC , so happy to be here and cant wait to get started now! See you all soon 💛🖤❤️— Andre Gray (@AndreGray7) August 9, 2017