The 24-year-old scored 10 goals for the Hornets in the Premier League last season but could not help to keep them up.
Dennis featured in Watford’s opening two Sky Bet Championship matches but did not feature in the squad for Friday night’s win over Burnley as he finalised a switch to the City Ground.
“Nottingham Forest is delighted to confirm the signing of striker Emmanuel Dennis from Watford,” a club statement read.
No terms were disclosed by Forest, with a reported £20million fee having been agreed.
Manager Steve Cooper has strengthened his squad with a significant number of signings during the summer transfer window.
Forest have also been linked with Brighton forward Neal Maupay, who was left out of Saturday’s squad against Newcastle.