The 35-year-old defender will play for the English second tier club until the end of the season after leaving Japanese outfit Omiya Ardija.
Neill, who is nearing 100 caps for his country having made his debut in 1996 and has been part of two FIFA World Cup™ finals squads, was keen to secure regular first-team action ahead of Brazil 2014.
Since leaving Turkish club Galatasaray in 2011, Neill has spent time with Al Jazira, Al Wasl and Sydney FC.
But Neill had been training for the past week with Beppe Sannino's squad, who are 12th in the Championship, and he jumped at the chance to making a playing return in England, where he had already had spells with West Ham, Everton, Blackburn and Millwall.
"I want to add my experience to the Watford squad and I'm hoping that some of my natural leadership skills can benefit the group here," Neill told Watford's official website.
"I'm highly motivated to keep playing. There's still a huge passion within me for football. I've had experience in different territories across recent years.
"I've spent 14 years of my career in England and my family are based here.
"I took up challenges in different countries because I wanted some new experiences - but this is a great chance for me to play at an excellent level and help Watford finish the season as strongly as possible."