The 69-year-old Italian becomes Watford's 14th manager in 10 years, replacing Xisco Munoz, who was sacked on Sunday after less than a year in the post.
Watford announced on Monday that Ranieri has signed a two-year contract at Vicarage Road.
Watford, who were promoted to the Premier League after finishing second in the Championship last season, are 15th in the table with seven points in as many games.
🇮🇹 𝐂𝐋𝐀𝐔𝐃𝐈𝐎 𝐑𝐀𝐍𝐈𝐄𝐑𝐈 🇮🇹— Watford Football Club (@WatfordFC) October 4, 2021
Our new Head Coach 🤩 pic.twitter.com/Dhy5fnckuW
Ranieri infamously masterminded Leicester's 5000-1 league title victory in 2016, later winning the Best FIFA Men's Coach award, although he was dismissed midway through the following season.
The Italian last worked in the Premier League during the 2018-19 campaign when he took over at Fulham in November but was sacked after winning three of his 17 games in charge.
He left Sampdoria at the end of last season after achieving a ninth-place finish, having taken charge in October 2019 with the club bottom of Serie A.
Watford will host Liverpool on Oct. 16 after the international break for Ranieri's first game in charge.
Information from Reuters was included in this report.