The Championship side have made the decision to end Paulo Pezzolano's contract after only five months and 10 matches in charge, announcing the return of former boss the Spanish coach as his successor.
Reports suggest that Pezzolano, appointed in the spring to replace Tom Cleverley, along with his technical staff, were told not to lead training on midweek as rumors about his exit mounted on Tuesday.
The 40-year-old was summoned for a meeting where he was named the 11th manager the club have let go since the start of 2020.
"The club is delighted to welcome back Javi," said Watford's chairman and CEO. "His enthusiasm, leadership and well-defined plan will help us build stability, togetherness and positive energy.
"We are sure many fans who hoped Javi had stayed on in 2019. With this talented squad, we are convinced his know-how and qualities are exactly what we need now."
The returning manager guided Watford to the FA Cup final for the only other occasion in the club's history in that year, but was sacked several games into the next season and most recently coached at Leeds United in last year.
"Personally, the feeling I have in this moment is that I'm returning home. It was the most enjoyable period of my professional life," Gracia remarked. "There are fond recollections and we have unfinished business at Watford. For us, it's another important step in our career.
"It is something special for us, and simultaneously we are highly motivated for this season. If we are together, we are more powerful."
Pezzolano's sacking comes even after their victory against Oxford United at Vicarage Road on Saturday, which lifted them to eleventh place in the Championship after a difficult opening that earned a handful of points from the first six games.
Pezzolano is said to have left disappointed by the decision to let him go, having guided the side to a undefeated streak of three games that also included a victory at home over Hull City and a tie at Portsmouth, placing them three points off the promotion playoffs.
The coach joined shortly after the end of last season with a strong record of guiding teams to advancement in La Liga, Brazil and his home country.
Elara Vance is a tech journalist with over a decade of experience covering AI, cybersecurity, and emerging technologies across Europe.