He has spent the first half of this season at Southampton, where he has played 25 times.
He will finish it at Vicarage Road, where he will be reunited with Brendan Rodgers - the Hornets boss who was reserve team manager at Stamford Bridge.
He will join up with fellow Blues player Liam Bridcutt, who is also on loan with the Hornets.
Watford sign Cork on loan
The highly-rated midfielder, 19, was an integral part of the Scunthorpe squad last season as they battled to survive in the Championship.