The Irishman, 26, arrives at Vicarage Road on a two-year deal with the possibility of financial add-ons relating to appearances.
Manager Sean Dyche, speaking from the club`s training camp in Biarritz, told Watford`s official website: "I`m thrilled to have an effervescent wide player coming into the fold here.
"He`s got ability and talent and will be a big part of helping us move forward as a team. I`m sure he`s looking forward to the challenge of not only earning his place in the side but also delivering consistently good performances."
After Craig Forsyth and David Mirfin, Yeates becomes Dyche`s third summer signing since taking charge of the Hornets, while he is also the third major player to depart Bramall Lane following United`s relegation to League One, coming after that of Darius Henderson and Jamie Ward.