Nigel Pearson will agree a deal to become the new Watford head coach within the next 24 hours, Sky Sports News understands.
His contract is expected to run until the end of the season, at which point both he and the club will reassess the situation.
Pearson will be in the stands at Vicarage Road on Saturday for Watford's game with Crystal Palace, with Hayden Mullins taking charge of the side as interim head coach.
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It means that Pearson's first two matches in charge of the Hornets would be against Liverpool and Manchester United.
Watford first spoke to the 56-year-old about replacing the sacked Quique Sanchez Flores on Thursday and talks have continued on Friday.
Should he become the Hornets' next boss, Pearson is believed to be keen to be reunited with Craig Shakespeare, who worked under him at Leicester and went on to manage the club in 2017.
Pearson is set to become the club's third head coach of the season following Sanchez Flores' departure last week and Javi Gracia's exit in September.
Watford also held talks with former Real Betis Head Coach Quique Setien. It is understood he was a strong candidate for the role before Pearson emerged as the preferred candidate.
Watford currently sit bottom of the Premier League table after 15 games, seven points from safety.
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