Mart Poom's contract has been cancelled by mutual consent ahead of the end of the season to let the Estonian look for a new club.
"I'm sorry I couldn't have played more games for Watford due to injury but I certainly enjoyed the matches that I did play in," Poom, who suffered a dislocated shoulder in September, told the club's official website.
"I am very grateful to all the medical staff at the club who have worked incredibly hard getting me back to fitness."