The Spanish forward has signed for Udinese for an undisclosed fee, after initially joining the club on loan at the start of the season.
The 26-year-old has only netted once for the Italian side, in the cup, but the fellow Pozzo-owned club have struck a deal with Watford which has seen him sign a contract with Udinese until 2024.
Before joining Udinese, Deulofeu enjoyed two-and-a-half years at Vicarage Road, scoring 17 goals in 70 appearances after arriving from Barcelona.
He played a starring role in Watford’s stunning FA Cup semi final comeback against Wolves in 2019, when he scored two goals, including an extra-time winner, to give the Hornets a 3-2 victory and the club’s second ever appearance in an FA Cup final.
Watford FC said in a statement: “We thank Gerard for his contribution to the club and wish him all the best for his future.”
A club statement from Udinese said: “Udinese Calcio is pleased to announce the definitive purchase of Gerard Deulofeu from Watford Fc.
“The Spanish striker ex AC Milan and Barcelona, who arrived last October on loan, is now signing a contract that will bind him to the club until 30 June 2024.
“Udinese Calcio and Gerard will thus continue, with great satisfaction, the path started in recent months with the hope of sharing great goals together.”