The veteran goalkeeper was offered the opportunity to return to his Spanish roots over the summer, with Valencia also looking forward to another European campaign.
Former Arsenal and West Ham United shot-stopper Almunia has, however, opted to prolong a nine-year stay in England.
His motivation for remaining at Vicarage Road is another shot at promotion to the Premier League, with Watford having fallen at the play-off final hurdle last term.
The 36-year-old is convinced Gianfranco Zola's men can get over the line in 2013/14 and has no regrets at having turned down a move back home.
Almunia said: "Playing in the final and losing at Wembley is one of the strong reasons I stayed.
"I want to finish the job here.
"Valencia wanted me but I told Watford they would be my first option."