No fee was disclosed but the Hornets said the 27-year-old left wing-back had signed a deal that will keep him at the club until June 2025.
The Ivory Coast international, who has not been selected for the Africa Cup of Nations, could make his Watford debut as soon as this weekend's FA Cup tie against top-flight rivals Leicester City.
Kamara started his career at LB Chateauroux before moving to Stade de Reims in 2015, where he won the French second division title.
He helped Reims qualify for the Europa League before joining Nice, currently second in France's Ligue 1, last season and making more than 50 appearances for the club in all competitions.
Kamara made his international debut in the Ivory Coast's 2-1 win over Burkina Faso in June last year.
Watford are currently 17th in the Premier League following a 1-0 defeat by Tottenham Hotspur last weekend, with the Hornets two points above the relegation zone.
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