The French midfielder signs for a club record fee.
He joins the newly promoted club on a four-year deal, for a fee believed to be in the region of £5.5 million, as they prepare for their first Premier League assault in eight years.
Capoue arrived at Spurs from Toulouse in 2013 for £9.5 million and was lauded as one of the most promising midfielders in France at the time.
The Frenchman made a strong start to life at the Lane and was a regular under Andre Villas Boas but the arrivals of Tim Sherwood and Mauricio Pochettino, most recently, brought about a change in his fortunes.
The 26-year old found himself out of favour last season, featuring just 15 times and failing to appear in the match-day squad since January 24th.
His arrival represents the club’s fourth signing this summer, adding to Sebastian Prodl, Matej Vydra and keeper Giedruis Arlauskis, and he could soon be followed by another Spurs Frenchman in Benjamin Stambouli, according to Sky Sports.
Similarly to Capoue, Stambouli arrived - highly-rated - from Ligue One but has found settling in difficult at Spurs and a move to Vicarage Road is a strong possibility.
The calibre of the signing, and the reported targets, demonstrate the growing ambition of Quique Sanchez Flores and Watford, and the belief that next season's Premier League return needn't be a flying a visit.