The newly-promoted Premier League side have paid £20m for Dennis' services and the Nigeria international has signed a four-year contract.
Dennis joined Watford from Club Brugge last season and scored 10 goals in 33 appearances but could not prevent their relegation to the Championship.
“Nottingham Forest is delighted to confirm the signing of striker Emmanuel Dennis from Watford,” a club statement read.
Steve Cooper's side have also added veteran Senegal midfielder Kouyate to their ranks.
The 32-year-old was a free agent after leaving Crystal Palace at the end of last season.
A club statement read: "The Senegal international joins Cooper's side having spent the previous four seasons with fellow Premier League outfit Crystal Palace, amassing 141 appearances for the South London club.
"The versatile 32-year-old joined West Ham United from Anderlecht in 2014 and made 147 appearances during a four-year spell with The Hammers before moving to Selhurst Park in 2018.
"Kouyate boasts 82 international caps for Senegal to date, having been part of the squad that lifted the Africa Cup of Nations title last year, as well as helping his nation qualify for the upcoming FIFA World Cup finals in Qatar."
Forest have now made 14 new signings since their promotion to the Premier League but lost 2-0 to Newcastle United last week.
They will hope to make amends when they host West Ham United on Sunday.
