The 21-year-old joins Watford, who are currently unbeaten so far this season, and will look to add to their excellent form as the club aim for promotion.
Jebbison joined Bournemouth from Sheffield United for £1.5m last month on a four-year contract and now the club have agreed to let him leave so he can continue his development.
The young striker spoke about the move and how he wants to learn everything he can.
"I am a sponge right now, I want to soak up everything and learn as much as possible, and be a better player on and off the pitch," he told the Watford website.
"There is a good structure here with good people, and good things that you don’t see behind the scenes.
"The gaffer (Tom Cleverley) is very ambitious in his goals, he is very clear in his mind what he wants, and we share the same values."