Vialli has been out of football since he was sacked by Chelsea on 12 September after just five games of the season.

In a statement the club said: "Watford football club have announced that Gianluca Vialli will be their new manager."

Vialli has signed a three-year-deal with the Hornets and is expected to bring in former Chelsea coach Ray Wilkins as his assistant.

The Italian said he was delighted to have joined the club.

"I had to think carefully to make the decision," he said. "But it did not take me long to realise this was the club for me.

"It wants to be a Premiership club and I'm here to do my best to deliver it. It will be a great challenge but we'll also have a lot of fun."

Winning start

Vialli admitted he had needed to take some time off following his shock sacking from Chelsea.

"When I was fired I left Chelsea not on good grounds," he said.

"So I took some time off which was good and I was surprised and flattered when I met with Watford."

"I think the appointment shows the club's ambition. This is a monumental day for Watford Football Club."

Vialli helped the Blues to the European Cup Winners' Cup and Coca-Cola Cup in his first season at Stamford Bridge after taking over as player-manager in February 1998.

An FA Cup final victory followed at the end of the 1999/2000 season before he left amid a poor league run and rumours of player unrest.

Nevertheless, the first test of Vialli's new skills will be a stiff one - returning the Hornets to the Premiership.

This season Taylor has been unable to take Watford to the play-offs following their relegation from the Premiership.