The Hornets announced a move for the Senegalese international winger during Thursday's frantic transfer window deadline, adding that Sarr makes the Vicarage Road move on a five-year-deal.
Sarr, 21, was a runner-up with Senegal at the 2019 Africa Cup of Nations and was part of the Lions of Teranga's setup at the 2018 World Cup in Russia.
A graduate of the famed Generation Foot academy in Dakar, which has produced the likes of Sadio Mane and Diafra Sakho, Sarr has enjoyed two breakthrough campaigns at Rennes, pairing 13 league goals with six assists over 59 Ligue 1 appearances.
Watford's previous club-record signing was Andre Gray's £18-million move from Burnley ahead of the 2017-18 campaign. Sarr becomes the Hornets' fourth first-team transfer of the summer following the arrivals of Danny Welbeck, Craig Dawson, and Tom Dele-Bashiru.