Watt, who stepped down as manager of Bostik League Premier side Margate on Monday, returns to the Gallagher Stadium after two and a half years.
He originally joined the Stones from Dover Athletic in March 2013, following a month on loan, and made eighty-nine appearances.
He was made club captain at the start of the 2013/14 season and lifted the Robert Dyas League Cup in 2014 and the Isthmian Premier Division trophy in 2015.
Prior to managing at Hartsdown Park, he was assistant-manager of Bostik South outfit Hastings United.