The Spanish international spent the last six months of the season on loan at Vicarage Road.
It's understood that Deulofeu has already voiced his wish to move back to Watford after a successful six-month loan spell towards the end of the season. Despite missing much of the season through injury, the winger still made seven appearances for the Hornets and managed to bag himself a goal, becoming a fan favourite at Vicarage Road thanks to his crafty wing play.
According to Spanish news outlet Sport, Watford are also keen on making the deal permanent and both parties are set to meet to discuss the matter, however the only thing holding the deal back is Jose Segura.
While Barcelona have agreed to let Deulofeu leave, Barcelona's general manager Segura is currently in Brazil and is due back next week, meaning talks cannot begin until then.
However, the report does claim both parties are keen for the deal to go through with Deulofeu becoming surplus to requirements at Camp Nou. The Spaniard does have a clause in his current contract which states at the end of next season he can leave the Catalan giants for €20m, however Watford won't be able to loan the winger for a further season.
This means a deal will need to be finalized this summer should Watford want to sign the 24-year-old, although the report does also claim Barca would allow the winger to leave for less than €20m but would want to include a number of performance-related clauses as well as a future sell-on clause.
The forward will be keen to get more regular first team football next season as he also looks to work his way back into the Spanish national side after missing out on their 23-man World Cup squad.