Former Reds manager Rafael Benitez signed Spaniard Riera from Espanyol for a fee of around £8million in August 2008.
However, he failed to find a regular place in Benitez's Reds starting line-up before being sold to Olympiakos in July 2010 for about half the fee the Anfield club paid.
He was sold by the Greek champions to Galatasaray for an undisclosed amount 12 months later and featured nine times for the Turkish club this season, including against Real Madrid, Juventus and Copenhagen in the Champions League group stages before being released by boss Roberto Mancini in January.
Udinese recently announced they would be signing the 31-year-old, who has 18 international caps for Spain, on July 1 after his release from Galatasaray.
Riera's move is still subject to international clearance but Doyley, 31, has signed his deal to stay on at Vicarage Road next season.
The Academy product has played 432 times since making his Watford debut in 2001, scoring two goals.