The 23-year-old Colombian has signed a contract which will run through 2025.
Sources told ESPN on Monday that Crew had agreed a transfer fee of just over $10 million with the English Championship side.
"Cucho is a world-class player who is still at an early stage of his career, and we could not be more excited to welcome him to the Columbus Crew," Tim Bezbatchenko, Crew president and general Manager said.
"Our goal was to sign a forward who would not only be an individual attacking threat, but who would make us more dangerous as a team.
"Cucho is a versatile attacker whose agility, mobility and unpredictability make him a constant threat for opponents as he has demonstrated while playing against top-level opponents in some of the best leagues in Europe."
Hernandez appeared in 28 matches for Watford in 2021-22 and contributed five goals and three assists.
He made his Watford debut in a Premier League match against Aston Villa on Aug 14, 2021, and scored just 49 seconds after coming off the bench.
Columbus coach Caleb Porter said: "Signing a top-level player at the striker position was our main priority this transfer window and we are ecstatic to sign an elite difference-maker like Cucho.
"Despite being just 23 years of age, he has shown a nose for goal against top level European opposition, and we firmly believe that he will flourish in our league.
"We are excited to get to work with Cucho and know the quality he brings to our squad will be a massive lift for our season."
After making his pro debut in Colombia in 2015, Hernandez played for Spain's S.D. Huesca from 2017-19 and tallied 20 goals and nine assists in 70 games.
He joined LaLiga side RCD Mallorca in 2019-20 and posted five goals and one assist in 24 appearances.
Remaining in LaLiga with Getafe CF in 2020-21, he scored two goals and added three assists in 23 games.