The Italian has signed a two-year deal at the Championship club after the Hornets' new owners confirmed the sacking of
"Everyone knows how
"I think Watford's fans can expect an exciting and attacking style from his team. Gianfranco represents this project perfectly."
The appointment completes Zola's return to English football two years after he left West Ham United.
It had been expected since the Pozzo family, who completed their takeover of the club from Laurence Bassini last week, revealed the 46-year-old Italian was their preferred candidate.
The Pozzo family also own Serie A side Udinese and La Liga outfit Granada.
The former Chelsea player had two seasons in charge of the Hammers, impressing in the first as he led the club to ninth place in the Premier League in the 2008-2009 season.
He struggled badly the following campaign, though, as his side finished just one place above the bottom three and he left his post two days after the end of the season.
Zola, who previously coached the Italy Under-21 side, is best known for a seven-year spell as a player with Chelsea, though, when he established himself as one of the most talented and possibly the best loved foreign player to play in the Premier League.
But he will not have an easy act to follow at Watford, with Dyche helping it finish a respectable 11th in his only season at the helm after succeeding Malky Mackay.
Sir Alex Ferguson has warned young managers to learn their trade at the lower levels of football if they want to make it to the top.