The Championship side have made the move to terminate Paulo Pezzolano's tenure after just five months and 10 games in control, announcing the reappointment of former boss the Spanish coach as his successor.
Reports suggest that Pezzolano, who was hired in May to replace Tom Cleverley, along with his technical staff, were told not to lead training on midweek as speculation about his exit grew on the previous day.
The 40-year-old was called to a meeting where he was named the 11th manager Watford have let go since the start of 2020.
"We are very pleased to welcome back Javi," stated the club's chief executive. "His passion, guidance and well-defined plan will foster stability, unity and positive energy.
"We are sure there are many supporters who hoped Gracia had never departed in 2019. With this talented squad, we are certain his experience and qualities are exactly what we require at this moment."
The returning manager previously led Watford to the FA Cup showpiece for the only other occasion in their history in that year, but was dismissed several games into the next season and most recently coached at Leeds United in 2023.
"Personally, the feeling I have right now is that I'm going back home. It was the happiest time of my professional life," Gracia stated. "There are fond memories and we have loose ends here. For us, it's a further important step in our journey.
"It is something special for us, and at the same time we are very ambitious for this campaign. If we are united, we are stronger."
Pezzolano's sacking comes despite the team's win against Oxford at their home ground on the weekend, which lifted them to 11th in the second tier after a difficult opening that yielded a handful of points from the initial six matches.
The Uruguayan is said to have left disappointed by the call to let him go, having guided Watford to a undefeated streak of three games that also included a home win over Hull and a draw at Portsmouth, placing them within touching distance off the playoff places.
Pezzolano arrived soon after the end of last season with a proven track record of leading clubs to promotion in La Liga, South America and his home country.
A seasoned gaming analyst with over a decade of experience in online casinos, specializing in slot machine strategies and player psychology.