The Spanish side released a statement on their website to say the deal will see Watford cover Deulofeu's wages for the duration of his stay at the Premier League club.
A Watford statement said: "Watford FC is delighted to confirm the loan signing of forward Gerard Deulofeu from FC Barcelona until the end of the season. Deulofeu is eligible to play a part against Stoke City on Wednesday evening having completed his move before Tuesday's midday deadline."
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