Samir Nasri has revealed he is ready to open talks with Manchester City about extending his stay at the Etihad Stadium.
Blackburn have signed young defender Michael Keane on loan from Manchester United for the remainder of the season.
Doyley's previous deal was due to expire this summer, but Sky Sports understands terms have been agreed on a new contract to keep the defender at Vicarage Road.
The versatile stopper made 38 appearances last season as the Hornets reached the play-off final, only to lose to Crystal Palace.
Watford boss Gianfranco Zola is keen to keep hold of Doyley and has offered the Jamaica international a one-year contract extension.
The 30-year-old has come through the youth ranks at Watford and has made over 400 appearances for the Hornets.