The 35-year old Australian national team captain has been on the hunt for a new club since he parted ways with Japanese outfit Omiya Ardija in December.
Neill spent time training with former club Blackburn Rovers, turning out in an U21s game, but has now been snapped up by the Hornets as he strives to ensure himself a spot in the Socceroos squad for this year's World Cup in Brazil.
"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," he told the club'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."
Throughout his extensive career, Neill has captained both West Ham United and Blackburn following his initial spell with Millwall. He has since played for Everton, Galatasaray, Al Jazira, Al Wasl, and Sydney FC.
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