The 26-year-old midfielder moved to White Hart Lane in the summer of 2013 but made just a dozen Premier League appearances in each of his two seasons in north London.
He now heads a few miles north to Vicarage Road where he will hope to become a first choice player for the promoted Hornets.
The Frenchman, who fell out of favour with Spurs manager Mauricio Pochettino, has signed a four-year deal for the Premier League new boys.
Announcing the signing on Monday morning, the club revealed they were “delighted” to acquire a player who has represented France seven times in his career, scoring one international goal against Belarus in September 2012.
Capoue made his name with Toulouse for whom he played almost 200 first-team matches and, in 2013, was nominated for Ligue 1’s Young Player of the Year award.