The 27-year-old has signed a one-year contract with the Hornets, with Watford holding an option to extend the deal for another season.
Diatta, who spent five-and-a-half seasons at Monaco, expressed his excitement at joining the English club and outlined his belief in their ambitions.
"I am very happy to join the team," he told the Watford website.
"After talking with the people here, the project was very clear in my head. Watford is a top club that was in the Premier League not too long ago, and I think it is the place they should be."
The move could also provide Diatta with an opportunity to revive his international career after he was left out of Senegal's squad for the opening two matches of the 2027 Africa Cup of Nations (AFCON) qualifiers.
Senegal faced Mozambique and Ethiopia in the opening round of the qualifiers, but Diatta was not selected after being without a club.
Head coach Patrick Vieira explained at the time that Diatta's lack of a club contributed to the decision to leave him out.
Diatta now has the chance to regain regular playing time at Watford and potentially work his way back into Vieira's plans.
The midfielder previously represented Senegal at the 2017 Africa Under-20 AFCON, scoring twice during the tournament.
Senegal reached the final but lost 2-0 to Zambia, finishing runners-up and securing qualification for the 2017 FIFA Under-20 World Cup.
Pitso Mosimane has highlighted the attacking quality of Oswin Appollis and Relebohile Mofokeng after the pair played key roles in Bafana Bafana's emphatic 5-0 victory over Eritrea.
Benni McCarthy's Kenya suffered a 1-0 defeat to Guinea on Thursday as Serhou Guirassy's first goal of the 2027 Africa Cup of Nations qualifiers earned the hosts victory.
Carlos Queiroz has left his role as Ghana coach after the Black Stars suffered a 4-2 home defeat to Gambia in CAF Africa Cup of Nations qualifying.
In Tuesday's AFCON 2027 qualifiers, Egypt put five goals past South Sudan, Guinea-Bissau shocked Nigeria 3-0, and Ivory Coast beat Somalia.
