Previously, Watford signed a three-year deal with Puma in 2012 and extended the partnership by a further 12 months, but Dryworld will supply match shirts and replica kits going forward.
Watford's commercial director Spencer Field said: “We are delighted to partner with Dryworld, who share our desire to innovate and compete with the biggest organisations in our industries.
“Further, as the largest sponsorship deal in the club's history, this relationship is representative of the dramatic growth in the commercial appeal of Watford Football Club.
“As we continue to grow as a club, both on and off the field, it is imperative that we work with companies who are ambitious and forward-thinking.
“DRYWORLD's ground-breaking technology and advanced design will ensure that our players and fans have access to the highest quality sportswear products in 2016/17 and beyond."