Financial details were not disclosed but British media reported that it was a record deal for Brighton worth 30 million pounds ($38 million).
Pedro, who made his senior debut in 2019 for Brazilian side Fluminense, joined Watford in 2020 and has scored 24 goals in 80 appearances.
"Joao has been a long-term target of ours, and he has also attracted a lot of interest from across Europe," Brighton's technical director David Weir said in a statement.
"He's a brilliant young talent, technically very good, quick and with an eye for goal. He will complement our existing forward line very well."
Brighton are sixth in the standings and are on the verge of qualifying for European football for the first time in their history.
We are delighted to announced that the club has agreed to sign forward Joao Pedro from Watford for undisclosed terms. ????
— Brighton & Hove Albion (@OfficialBHAFC) May 5, 2023
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