Academy coach Dave Hughes ordered his Under-19 team off the pitch following an incident during their match against Italian side Latina Calcio in the Wojtyla Cup in Rome on Wednesday.
An FA spokesman said: "We have made enquiries to the club to find out what has happened and have offered our assistance and support."
Watford manager Gianfranco Zola said the full details of the incident, which involved players rather than spectators, should be clearer when the team returns from Italy.
"Apparently there had been some bad tackles and some racist words used," Zola said.
"What happened is not nice and if there is something we can do, we'll do it.
"I have had a chat with Dave Hughes and he reported some things to me. We are looking into it to see what happened exactly. I want to find out more about what happened from the organisers. I need to have the bigger picture before commenting any more."
Zola added: "It looks like it was something between players but I am trying to find out more because I only spoke to Dave Hughes quickly last night."
Anti-racism group Kick It Out is also investigating the incident.