McEachran, 20, has previously spent time on loan at Middlesbrough and Swansea and his third spell will be under the guidance of Chelsea legend Gianfranco Zola, the Hornets boss.
He is the second player in as many days to be sent out from Stamford Bridge on loan, with Nathaniel Chalobah - who had a hugely successful spell on loan at Vicarage Road last season - moving to Nottingham Forest on Thursday.
McEachran was a regular at Middlesbrough last season, making 38 appearances.
He made his Blues debut at the age of 17, coming on as a substitute in a Champions League win away at Zilina in 2010 and he has made seven starts and 15 appearances off the bench so far.
He has played in all England's age group teams from U17 through to the U21s, for whom he played 13 times.