The 30-year-old England international leaves Villa after six seasons, having established himself as the club's record Premier League goalscorer with 91 goals.
Watkins joined from Brentford in 2020 and scored 108 goals in 278 appearances across all competitions. He reached 100 goals for Villa last season, becoming the first player in the modern era to achieve the milestone in claret and blue.
His time at Villa Park also brought European success, with Watkins playing a key role in the club's UEFA Europa League triumph last season, their first European trophy in 44 years.
He made his England debut in 2021 and went on to win 24 caps and score seven goals, featuring at two major international tournaments.
Watkins' departure is another significant change for Villa this transfer window, following the exits of Morgan Rogers, Youri Tielemans, Lucas Digne and Ezri Konsa.
The striker was absent from Villa's Premier League opener against Brighton last weekend after making himself unavailable while the transfer was being finalised. Manager Unai Emery subsequently said Watkins had apologised for the situation.
Watkins thanked Villa for his six years at the club in a social media statement.
"I am eternally grateful for the last six years. Not only has it shaped me as a player, but as a person," he wrote.
"We've been through so many ups and downs in my six seasons here, but one thing that has never changed is that I have given everything for this club."
Villa also paid tribute to Watkins' contribution, highlighting his goalscoring record, work ethic and role in their Europa League success before wishing him well at Al-Hilal.
"Aston Villa can confirm that Ollie Watkins has completed a permanent transfer to Al Hilal," began the statement.
"Signed by Dean Smith in 2020, Watkins hit double figures in every one of his six seasons at Villa Park and departs as our record Premier League goalscorer with a total of 91.
"He was also the first player in the modern era to score over 100 goals in claret and blue, achieving his century against Bologna last season.
"During his time at Villa Park, he has become an England international, representing the Three Lions at two major international tournaments.
"Capable of scoring different types of goals with a ruthless streak, allied to a selfless work ethic for his team’s benefit, Watkins leaves Villa having played his part in our UEFA Europa League victory and with the very best wishes of everyone at the football club."
