The 20-year-old joins from Chelsea after spending the first half of the 2024/25 campaign with French top-flight side RC Strasbourg where he was recalled to recover from a shoulder injury.
He joined Chelsea from Major League Soccer side Atlanta United but has yet to make his debut for the Blues despite his ability. The American international has already won his first international cap against Mexico and is certainly one to watch for the near future.
Watford boss Tom Cleverley opened up on the move and understands it may be a while before he can make an impact on the side.
"Caleb's a really athletic left-back with great technical quality – as you'd expect from a Chelsea player," said boss Tom Cleverley.
"It'll be a couple of weeks before we see him in training, so that's a known quantity and we're fine with that.
"It's great to add Caleb to our defensive options and I'm looking forward to getting him integrated with the group."