The 26-year old Northern Ireland international has put pen to a four-year deal with the Hornets ahead of their return to the Premier League.
Cathcart enjoyed a previous loan spell at Vicarage Road in 2009 while he was contracted at Manchester United.
OFFICIAL: Craig Cathcart signs a new four-year contract with #watfordfc. Full story: http://t.co/S1695mngxfpic.twitter.com/H7S1qRutC8
— Watford FC (@WatfordFC) July 2, 2015