The 23-year-old scored 16 times last season as Watford were promoted back to the Premier League after an eight-year absence.
It was Vydra???s second spell at Vicarage Road, having first joined from Udinese in 2012.
He went on to score 22 goals that season as Watford missed out on promotion in the play-off final against Crystal Palace at Wembley.
He joined West Bromwich Albion on loan the following season before returning to Hertfordshire last summer.