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."
Yeates emerged through the youth system at Tottenham, enjoying fruitful loan spells elsewhere before moves to Colchester, Middlesbrough and Sheffield United.
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.