The 27-year-old moves to Goodison Park on a three-year deal, with Everton holding the option to extend for a further year.
Doucoure is Everton’s third signing this week after the Toffees also stuck deals for Real Madrid’s James Rodriguez and Napoli’s Brazilian midfielder Allan.
Everton had been tracking Doucoure since the start of last season and even had a £30m bid for the Frenchman rejected by Watford at one stage.
A deal for Doucoure became easier to strike this time round after the Hornets suffered relegation from the top flight.
"I have been waiting a long time to come here and now it has happened so I am very happy," Doucoure told his new club's website.
"I had some interest from other clubs but from the beginning when Everton showed an interest in me I told my agent to focus on Everton.
"It was the only club I wanted to join.
"Everton has a big history in English football and it is a good club for me to have a step up in my career. I am very happy now to be an Everton player and very excited for the future.
"It is an ambitious project here and it was a big part of my decision, having [director of football] Marcel [Brands] and the coach Carlo Ancelotti wanting me."
Doucoure spent four-and-a-half seasons with Watford after moving to Vicarage Road from French Ligue 1 side Rennes in January 2016.
The former France under-21 international made 129 league appearances in total during his time at the club and scored 17 goals.
He joins an Everton side who finished 12th in the Premier League last season and are looking to break into the top flight’s elite under former AC Milan, Real Madrid, Paris Saint Germain and Chelsea manager Carlo Ancelotti.
Everton will begin the season with a trip to Tottenham Hotspur on Sunday.
