The Uruguayan replaces Tom Cleverley, who was sacked on 6 May after the Hornets failed to reach the Championship play-offs, finishing in 14th place.
Pezzolano is Watford’s 12th head coach since Javi Gracia departed in September 2019 and the ninth since the end of the 2020-21 season.
The 42-year-old has achieved promotion as a head coach in Spain, Brazil and his home country.
“Paulo has a hugely impressive track record working with young players, which is essential when you look at the age profile of our squad,” sporting director Gianluca Nani told the Hornets website, external.
“He has had success at virtually every club, including league titles and promotions, but it is his work on the training ground that impressed the most when we undertook our research.”
Who is Paulo Pezzolano?
Pezzolano’s 15-year playing career as an attacking midfielder took him across Uruguay, Brazil, Spain and China.
He began his managerial career in his home country with Montevideo City Torque where he won the Segunda Division title in 2017.
In Brazil, he won promotion to Serie A with Cruzeiro before achieving the same feat in Spain, taking Real Valladolid to La Liga.
However, Pezzolano was sacked in November with Valladolid bottom of the table, and the club have subsequently been relegated.
“He has innovative ideas and processes which he transmits passionately to the players,” Nani added.
“We believe Paulo is the leader we need as we refocus ahead of the new season. He is fully aware of our ambitions and determination to push for promotion and embraces that challenge.
“The club achieved great success when making similar appointments in Slavisa Jokanovic, Javi Gracia and Xisco Munoz, and we hope our fans welcome Paulo and wish him every success as we try to achieve the owner’s clear aim of challenging for a return to the Premier League.”