The Seagulls reached an agreement with the Hornets last month and have now gotten the deal over the line.
The transfer fee paid for the 21-year-old eclipses the £20m Brighton paid to sign Adam Webster from Bristol City in 2019.
Pedro made 109 appearances and scored 24 goals after joining Watford from Fluminense in January 2020.
Pedro scored 11 goals in 35 championship games for Watford this season.
Brighton technical director David Weir said: "Joao has been a long-term target of ours, and he has also attracted a lot of interest from across Europe.
"So, we are delighted to have reached an agreement with a key target for the club ahead of the summer window opening, and it is great for Joao that he can focus on the new season, with his immediate future settled.
"He's a brilliant young talent, technically very good, quick and with an eye for goal. He will complement our existing forward line very well. He also has settled well here, with good experience of both the Premier League and Championship and more than 100 games for Watford."
Brighton will play Europa League football next season following a sixth place finish in the Premier League this term.
Roberto De Zerbi's side have also signed veteran James Milner from Liverpool on a free transfer.
