The 22-year old was offered a new contract at Chelsea but wanted to play more regular football and has opted to move to Vicarage Road.
Chalobah, who also had interest from Southampton and Swansea City, agreed a five-year deal and underwent a medical at the club's training ground on Thursday evening before being unveiled.
Chalobah will wear the No 14 shirt for the Hornets and Watford boss Marco Silva looks to utilize him in midfield.
The 22-year-old returns to Vicarage Road where he spent the 2012-13 season on loan.
During that spell he made 42 appearances in the Championship and scored five goals.






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