The former Stoke left-back spent most of his career with the Premier League side, completing loan stints at Barnsley, Leeds, and Portsmouth.
"Carl played an important part in helping the club to get where it is today. He was a hugely popular figure,” Stoke boss Tony Pulis told the club’s official website.
"We are all delighted for him that he has been offered this new challenge with a club who have been there or thereabouts in the Championship promotion race in recent seasons."
The 24-year-old, who made 60 appearances for the Potters, may be in the running to complete his Watford debut against Burnley this weekend.