The 27-year-old underwent a medical with Watford on Thursday afternoon and has joined the Hornets on an initial loan deal, which includes the option of a permanent move at the end of the 2016-17 campaign.
Cleverley signed for Everton from Manchester United in the summer of 2015 and made 30 appearances for the Toffees during the 2015-16 season under Roberto Martinez.
The attacking midfielder has only started four Premier League matches this season, however, and has been deemed surplus to requirements following the arrival of Morgan Schneiderlin from Man United.
Cleverley, who spent 15 years with Man United before seeking pastures new, is contracted to Everton until the summer of 2020. He could make his Watford debut against Middlesbrough on Saturday afternoon.