talkSPORT revealed in April that the Seagulls had agreed a fee for the 21-year-old and now the Premier League side have confirmed he will join them for what is believed to be a record fee of just under £30m.
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Pedro joined the Hornets in 2020 from Brazilian side Fluminense and has made 109 appearances for the club since.
He has scored 24 goals during that time but will soon be on his way back to the Premier League, this time at Brighton.
The forward's fee surpasses the £20m paid for Enock Mwepu in 2021.
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Brighton technical director David Weir said: "Joao has been a long-term target of ours, and he has also attracted a lot of interest from across Europe.
"So, we are delighted to have reached an agreement with a key target for the club ahead of the summer window opening, and it is great for Joao that he can focus on the new season, with his immediate future settled.
"He's a brilliant young talent, technically very good, quick and with an eye for goal. He will complement our existing forward line very well. He also has settled well here, with good experience of both the Premier League and Championship and more than 100 games for Watford.
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"We are really looking forward to starting work with him in pre-season, here in the UK and when we travel to the United States for the Premier League Summer Series."
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Pedro's move will be formally completed in June once the summer transfer window has opened where he will sign a contract until 2028.
The Brazilian will not be the only new arrival at Brighton, with James Milner on course to follow from Liverpool.
talkSPORT understands the 37-year-old, who will be a free agent in the summer, is close to finalising a deal with his new club.
Milner has made 328 appearances during an eight-year spell at Liverpool, winning the Premier League, Champions League, FA Cup, League Cup, Super Cup, Club World Cup and Community Shield.
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As he approaches the end of his career, the midfielder is keen to embark on a new challenge.
His former Reds teammate Adam Lallana, who currently plays for Brighton, is understood to have had a role in convincing him to join.
Milner could very well be playing European football with the Seagulls next season.
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Brighton are currently sixth in the Premier League table and therefore currently on course for the Europa League.
Roberto De Zerbi's side claimed a huge 1-0 win over Manchester United on Thursday thanks to Alexis Mac Allister's stoppage-time penalty.
They now have six games left to secure their hopes of European football but face upcoming tests against Arsenal, Newcastle and Manchester City.