"I'm sorry to see Terry go, I've enjoyed working with him," Watford boss Ray Lewington told the clubs official website.
"I always said I would do nothing to stand in his way if an offer he was really interested in came along.
"I've been good to my word and the board have been very fair to Terry. The attraction for him is working with Sam Hammam, who he knows well.
"He moves on with our blessing."