Garcia replaces Beppe Sannino at Vicarage Road after the Italian resigned from his post on Sunday, despite only taking over on December 18 last year.
A statement on the club's website read: "Watford Football Club is delighted to confirm the appointment of Oscar Garcia as head coach, the Hornets having won the race against several high-profile English clubs to secure his services.
"Oscar's recent Championship experience, taking Brighton & Hove Albion into last season's Championship promotion play-offs, was a key factor in his appointment.
"Everyone at Vicarage Road extends their best wishes to Oscar for his new role, which he takes up with immediate effect."Watford will look to Garcia to build on the club's successful start to this season's Sky Bet Championship campaign, with his new club currently in second place having won four of their opening five games.