Deulofeu has agreed a five-year contract until the summer of 2023.
The 24-year-old started his career in the youth ranks of Barcelona, graduating from the famed La Masia setup and making his first team debut in 2011.
He then became an important player for Barcelona B, before leaving Camp Nou for Everton on loan in 2013. He later returned to Merseyside on a permanent deal following a loan at Sevilla. After a further loan spell at AC Milan, Barcelona activated a buy back clause in 2017.
Deulofeu played a total of 17 games in his final half season with his boyhood club in 2017/18 and can now look forward to a promising future in the Premier League with Watford.