The winger has penned a three-year deal and will cost Albion double what they paid Manchester United for Andy Ritchie in 1980.
Buckley's arrival marks the start of Gus Poyet's preparations for life in the Championship following their League One title-winning campaign.
And the Seagulls boss said: "I watched three or four of Watford's games last season and Will really impressed.
"Our scouts have also been watching him and have also been impressed. That made it a very easy decision.
"He is young, but he knows the division well, and he is a player I am really looking forward to working with and making him one of us."
Buckley, 21, spent just 18 months with Watford, scoring five goals in 31 Championship starts after being lured from Rochdale.