Under Xisco Watford had picked up seven points from seven Premier League games this season and were 14th in the table.
Watford’s owners, the Pozzo family, are making their 14th managerial change since they took over in 2012.
Ranieri, who would be returning to the English top-flight which he famously won with Leicester City in 2015-16, left Serie A side Sampdoria in the summer.
He has a wealth of experience and Watford could be the 21st club he has taken charge of in his 35-year managerial career. In that time he has won eight trophies, including the 1998-99 Italian Cup and 2004-05 Super Cup with Valencia and the Premier League title with the Foxes.
He is held in high regard at Leicester but he was sacked in 2017 after a run of poor results saw the club just one point above the relegation zone with 13 matches left in the 2016-17 season.
After Leicester he took a season away from the Premier League, in Nantes, before returning to take charge of Fulham in 2018. He only lasted 106 days before Fulham sacked him with the club facing relegation from the Premier League.
Spaniard Xisco, who was sacked after Saturday’s 1-0 defeat by Leeds, is the first Premier League manager to lose his job this season.
Watford’s next Premier League game is at home against Liverpool on Saturday, 16 October.