Vydra is on loan at Vicarage Road from Udinese, who are also owned by the Pozzo family, and took his tally for the season to 19 with a goal in Saturday's 2-1 win over Bolton Wanderers.
The Czech has attracted interest from the Premier League, but Zola says Watford are working hard to hang on to the 20-year-old.
"We are working on getting it done this week," said Zola. "I believe both parties want it, so we are trying very hard."
Team-mate Almen Abdi is pleased Watford did not lose Vydra in the January transfer window and is also keen for the forward to stay with the Championship club in the long term.
"We are delighted he is still here and I hope we will see him beyond the summer," said Abdi.
"I have known him for two-and-a-half years now from Udinese. We know each other well and it is an advantage for us."