He has signed a 3 and a half year deal.
A delighted Bruce said: "We have been watching Ben for some time, and believe he has the maturity to step back to the highest level and make an impression.
"He's a midfielder who scores goals, has quick feet, plenty of power and is a terrific prospect.
"I wanted to move quickly to start filling the gap left by Wilson Palacios, and Ben is the start of that process."
Wigan beat Middlesbrough in the race to capture Watson. "It speaks volumes about the progress of the club that we can compete with established Premier League clubs for players," Bruce continued.
"I am delighted Ben has agreed to join us. I think our supporters will take to him quickly, because he's a real hundred percenter."
Watson, who made 21 appearances for Palace in the top flight in their 2004-05 relegation season, is confident he has made the right choice.
"It's great to be back in the Premier League," he said.
"Steve Bruce is the big pull here, and it's a great time to be joining the club and a team who are really flying.
"I want to thank everyone at Palace, and all the supporters, because they have been great to me.
"But this is a terrific opportunity for me to play in the top flight again, and I just felt the time was right for a move for me."